NEW DELHI: The average cost of construction is estimated to have increased by up to 11% over the past year. Average cement prices have seen a steep decline of 15%, while average steel prices have witnessed a marginal 1% decrease over the last 12 months, according to Colliers.
The cumulative effect of rise in the prices of four key construction materials including cement, steel, copper and aluminum have been relatively low.
Badal Yagnik, CEO, Colliers India said, “While rise in prices of key construction materials was relatively modest over the last year, labour costs have been driving the overall cost of construction upward. With labour accounting for more than one-fourth of overall construction cost, a 25% annual rise in labour costs has stretched construction budgets and impacted operational expenses. Moreover, the need for skilled labour and the associated costs for training, safety and regulatory compliance further adds to spiraling labour costs.” said
As of October 2024, cost of construction in the residential segment saw an estimated 11% increase year-on-year.
| Construction cost component | YoY change (vs Oct 2023) | 2 – year change (vs Oct 2022) | 5 – year change (vs Oct 2019) |
| Steel | -1% | -9% | 57% |
| Cement | -15% | -25% | 30% |
| Copper | 19% | 26% | 91% |
| Aluminum | 5% | 7% | 57% |
| Labour | 25% | 80% | 150% |
Price/cost change of key construction cost components (Oct 24)
Amongst various real estate segments, construction cost escalation has been relatively sharper in the residential segment.
The growing focus on better building quality and the rising demand for well-equipped gated communities have encouraged residential developers to improve their projects, which has led to higher construction costs in the housing sector.
Vimal Nadar, senior director and head of research, Colliers India said, “Despite rising construction cost across real estate segments, the commercial and industrial & warehousing segments have witnessed robust new supply during 2024. For instance, the Indian office market saw 37 million sq ft of new completions in the first nine months of 2024, while the industrial & warehousing segment saw about 22 million square feet of new supply.”
Real estate developers are increasingly making investments in training and automation to address challenges related to volatilities in the availability of skilled manpower, which in turn can potentially facilitate better project scheduling.
