The construction costs for greenfield real estate projects in India are expected to rise by 2-4% in 2024, according to a report by CBRE. The increase is attributed to various factors, including a rise in labor costs, despite a decrease in the prices of key construction materials like cement and steel. The report highlights ongoing challenges within the sector, such as labor shortages and the need for sustainable practices.
- Construction costs for greenfield projects have increased by 2-4% in 2024.
- Labor costs have escalated due to shortages, countering material cost reductions.
Current Trends in Construction Costs
According to the CBRE report titled ‘India Construction Cost Trends 2024-25’, construction costs for greenfield projects have been experiencing a steady rise of 2-4% annually. This increase is primarily due to heightened input rates, which have offset the decrease in material costs observed in the same timeframe. Specifically, while cement costs declined by 6-8%, steel prices fell by 3-5%, and aluminium prices saw a slight dip of 0-2%, there was a notable increase in the costs of wood and stone by 3-6% and 0-2%, respectively. This reflects selective demand pressures within the market.
The persistent labor shortages in the industry have played a significant role in escalating overall construction costs. Skilled, semi-skilled, and unskilled labor shortages have resulted in an average increase of about 5% in labor expenditures during 2024. This rise in labor costs effectively negates the benefits of the material cost reductions, leading to sustained elevated construction expenses across various projects. As a result, high-rise residential projects, particularly those with 30 floors, now see construction costs ranging from Rs 5,500 to Rs 6,100 per square foot in the Delhi-NCR region. The cost is Rs 3,100-3,500 for 12-storey buildings.
The Future of Construction in India
Looking ahead, Anshuman Magazine, Chairman & CEO for India, South-East Asia, Middle East & Africa at CBRE, emphasizes the importance of the construction sector to India’s economic growth. He forecasts that India will become the world’s third-largest construction market by 2025. Factors like rapid urbanization, stabilizing construction costs, and sustained demand for real estate are expected to foster new opportunities within the sector.
The ongoing challenges associated with workforce shortages may hinder progress; however, the construction industry continues to attract significant investments fueled by a focus on sustainability, advanced technology, and high-quality developments. As the sector evolves, stakeholders will need to navigate the complexities presented by labor costs while leveraging the potential for innovative construction practices.
