Soaring Construction Costs: A Heavyweight Challenge for Urban Real Estate

Construction costs for housing projects in major cities have surged by 39% over the past four years, reaching Rs 2,780 per sq ft. The increase is primarily due to rising labor expenses and price hikes in construction materials, impacting developers' budgets and operational expenses significantly.

The cost of constructing housing projects in major cities has escalated dramatically, up by 39% over the last four years. As a result, expenses have reached Rs 2,780 per square foot, largely driven by rising labor costs and heightened prices of construction materials, according to a report from Colliers India.

The consulting firm highlighted that premium housing projects recorded construction costs of Rs 2,000 per square foot in October 2020, soaring to Rs 2,780 by October 2024. This data encompasses costs for Grade A residential buildings in tier-I cities.

The report further noted that while the prices of key materials like cement and steel showed modest declines, the labor cost, accounting for over a quarter of overall expenses, surged by 25% last year. Developers are now focusing on cost optimization and improving supply chain management to tackle these challenges.

(With inputs from agencies.)