Construction Costs For Housing Projects Surge 39% In 4 Years; Here's Why

Cement prices have dropped by 15 per cent on average, and steel prices saw a slight decrease of 1 per cent. However, labour costs surged by 25 per cent over the last year

Yagnik noted that the demand for skilled labour, along with the rising costs of training, safety measures, and regulatory compliance, contribute to the escalating labour expenses

Source : PTI

The average cost of construction for housing projects in major cities has jumped by 39 per cent over the past four years, reaching Rs 2,780 per square foot, driven by rising costs of building materials and labour, according to a Colliers India report.

Data from the real estate consultancy reveals that the average construction cost for premium housing projects was Rs 2,000 per square foot in October 2020. By October 2021, it had increased to Rs 2,200 per square foot, and then to Rs 2,300 in October 2022, Rs 2,500 in October 2023, and finally, Rs 2,780 in October 2024.

The report noted that these figures represent the average cost for a Grade A residential building with 15 floors in tier-I cities. Over the past year, construction costs have risen by 11 per cent, largely due to a sharp increase in labour costs, along with moderate price hikes in construction materials such as sand, brick, glass, and wood.

Interestingly, the price increases in essential construction materials like cement, steel, copper, and aluminium have had a relatively minor impact. Cement prices have dropped by 15 per cent on average, and steel prices saw a slight decrease of 1 per cent. However, labour costs surged by 25 per cent over the last year, while copper and aluminium prices rose 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."

Additionally, Yagnik noted that the demand for skilled labour, along with the rising costs of training, safety measures, and regulatory compliance, contribute to the escalating labour expenses.

The report explained that developers are optimising expenses by reassessing their budgets to manage the ongoing rise in construction costs and related challenges. The consultant added that real estate developers are also enhancing supply chain management by diversifying suppliers and sourcing key construction materials locally.