The average cost of construction for housing projects in big cities has increased by 39 per cent in the last four years to Rs 2,780 per sq ft, with building materials and labour becoming expensive, according to Colliers India.
Real estate consultant Colliers India data shows that the average construction cost for premium housing projects stood at Rs 2,000 per square feet in October 2020.
The construction cost rose to Rs 2,200 per square feet in October 2021, Rs 2,300 per sq ft in October 2022, Rs 2,500 per sq ft in October 2023 and Rs 2,780 per square feet in October 2024.
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Colliers India said these are average costs for a Grade A residential building of 15 floors. The data pertains to tier-I cities.
Over the last one year, the consultant said the average cost of construction of housing projects rose 11 per cent due to a significant surge in labour costs coupled with a moderate price increase in construction materials like sand, brick, glass, wood etc.
Notably, the cumulative effect of a rise in the prices of four key construction materials, including cement, steel, copper and aluminium, has been relatively low.
Average cement prices have seen a steep decline of 15 per cent, while average steel prices have witnessed a marginal 1 per cent decrease over the last 12 months.
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However, the consultant pointed out that the labour cost rose 25 per cent in the last one year.
The average rate of copper and aluminium increased by 19 per cent and 5 per cent, respectively.
Badal Yagnik, Chief Executive Officer, Colliers India, said, "While the 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 per cent annual rise in labour costs has stretched construction budgets and impacted operational expenses."
Moreover, Yagnik said the need for skilled labour and the associated costs for training, safety and regulatory compliance further add to spiralling labour costs.
To navigate the steady rise in overall construction costs and associated challenges, Colliers India said that developers are optimising costs by reassessing budgets.
Real estate developers are also looking at improving supply chain management by diversifying suppliers and opting for localised sourcing of key construction materials, the consultant added.
Additionally, realty firms 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.
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