India's Construction Costs Set to Rise in FY2024
JLL's Construction Cost Guide Predicts 6% Increase Across All Sectors
JLL's latest Construction Cost Guide forecasts a 6% rise in India's overall construction costs for the financial year 2024, driven by increased prices of essential building supplies.
Mumbai Remains the Most Expensive City, Chennai Offers Better Value
Mumbai maintains its position as the most expensive city, primarily due to the higher cost of crucial building materials like cement, structural steel, reinforcement steel, and stones. In contrast, Chennai emerges as a more cost-effective option for construction projects.
Insights from JLL's Construction Cost Guide
The comprehensive guide provides:
- Construction Cost Analysis: Detailed breakdown of real estate asset construction costs
- Market Trends: Overview of key building materials and their market trends in major Indian markets
- Cost Matrix: Representation of various construction styles and quality levels to aid in cost planning
Reevaluating Real Estate Decisions Amid Rising Costs
According to Jipu Jose James, Managing Director, Project Development Services (PDS), JLL India:
“To maximize expenditure, businesses are currently reevaluating their real estate decisions. The general trend is clear: construction costs are rising, even though the precise impact of the pandemic on these costs is still up for debate.”
Prioritizing End-User Experience and Cost Management
In response to rising costs, customer spending is expected to focus on functions that enhance the end-user experience. Effective cost management is crucial for maintaining budget control and completing projects that are both commercially and qualitatively viable.
The Impact of Labor Costs on Construction
Labor Market Trends:
- Narrowing Supply-Demand Gap: Construction shifting to non-metropolitan and rural areas, leading to a more stable labor market and reduced wage inequality
- Rising Labor Rates: Average annual increase of 6% over the last three years, contributing to a 2% rise in construction costs
- Workforce Growth: Approximately 71 million employees in FY2023, up from 63.98 million the previous year, driven by urbanization and infrastructure demands
Challenges in Labor Market:
- Skilled Labor Shortage: Primarily due to a lack of vocational training institutions, hindering skill development