The average cost of construction for housing projects in major cities has surged by 39 per cent over the past four years, reaching Rs 2,780 per square foot in October 2024, according to data from Colliers India. The increase has been attributed to the rising prices of building materials and labour.
Colliers India’s figures show that the average construction cost for premium housing projects stood at Rs 2,000 per square foot in October 2020. The costs gradually increased over the following years, reaching Rs 2,200 per square foot in October 2021, Rs 2,300 per square foot in October 2022, Rs 2,500 per square foot in October 2023, and finally Rs 2,780 per square foot in October 2024.
The data refers to the construction cost for Grade A residential buildings, typically 15 floors high, in tier-I cities. Over the past year alone, construction costs have risen by 11 per cent, primarily driven by a significant increase in labour costs, alongside a more moderate rise in the prices of key construction materials, such as sand, brick, glass, and wood.
Despite the rise in materials costs, Colliers India noted that the cumulative effect of price increases in four major construction materials—cement, steel, copper, and aluminium—has been relatively low.
Cement prices have fallen by 15 per cent, while steel prices have seen a slight decrease of 1 per cent over the past 12 months. However, copper and aluminium have experienced price increases of 19 per cent and 5 per cent, respectively.
The biggest factor behind the increase in construction costs has been labour, which has risen by 25 per cent in the last year alone. Labour now accounts for over a quarter of the overall construction cost, and the sharp rise in wages has strained construction budgets and increased operational expenses.
Additionally, the need for skilled labour and the costs related to training, safety, and regulatory compliance have further inflated labour costs.
Badal Yagnik, CEO of 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."
To manage the ongoing rise in construction costs, real estate developers are adjusting their budgets and optimising costs. They are also improving supply chain management by diversifying suppliers and sourcing materials locally.
Developers are increasingly investing in training and automation to address challenges posed by the volatility in the availability of skilled manpower, which may improve project scheduling and efficiency.
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