India's Construction Costs Surge: A 2024 Overview

In 2024, India's construction costs have increased by up to 11% across various sectors, driven mainly by higher labor expenses despite stable material prices like cement and steel. Developers are adapting by optimizing supply chains and sourcing locally amidst rising costs and borrowing expenses affecting profit margins, particularly in affordable housing.

India's construction costs have risen across all segments in 2024, with an increase reaching up to 11% according to a Colliers report. While material prices such as cement and steel have stabilized to some extent, labor costs have surged, impacting the overall expenditures, especially in residential projects.

Colliers India CEO Badal Yagnik highlighted that the rising labor expenses have been the key factor behind escalating construction costs, prompting developers to rethink budgets and strategies. Builders are optimizing costs by enhancing supply chain management, diversifying sourcing, and using local materials.

Though staple materials like cement and steel showed signs of price drops or stability, labor costs, constituting around 28% of total construction expenses, have risen significantly. The surge in housing construction costs—11% year-over-year—is particularly notable, spurring developers to introduce cost-reduction measures.

In the affordable housing sector, the hike in costs, coupled with higher borrowing rates, has squeezed profit margins. Meanwhile, commercial construction costs have increased 6% to an average of Rs 2,850 per square foot, with substantial office space demand—37 million square feet completed by October 2024.

The industrial sector's construction costs have held steady in 2024 but represent a 27% increase since 2020. According to Vimal Nadar of Colliers India, commercial and industrial segments continue to see robust supply despite rising costs.

Developers are adapting to the growing warehousing and industrial space demand by incorporating automation and sustainable designs. An estimated 25-30 million square feet of new supply is projected in major cities this year.

(With inputs from agencies.)