Cost of real estate construction in India expected to go up by 6% in 2024; Mumbai most expensive city

Mumbai continues to be the most expensive city with construction costs higher while Chennai offers a more cost-effective options

The overall construction cost in the country will experience an average increase of 6% across various sectors in the financial year (FY) 2024, according to JLL’s latest Construction Cost Guide.

The overall construction cost in the country will experience an average increase of 6% across various sectors in the financial year (FY) 2024. (Picture for representational purposes only) (Pixabay)

Among the cities, Mumbai continues to be the most expensive city with costs higher while Chennai offers a more cost-effective option. The higher costs in Mumbai can be attributed to the increased prices of essential construction materials like cement, reinforcement steel, structural steel, and stones.

The guidebook provides insights into market trends and construction costs of real estate assets in major Indian markets. It includes a cost matrix that represents different styles and quality levels, along with an analysis of market trends for major building materials.

“Businesses today are reassessing their real estate choices to optimize spending. While the exact impact of the pandemic on construction cost is still a topic of discussion, the general trend is evident - construction cost is on the rise," said Jipu Jose James, Managing Director, Project Development Services (PDS), JLL India.

As a result, customer expenditure is expected to prioritize aspects that enhance the end-user experience. Understanding and effectively managing cost are crucial in maintaining budget control and delivering economically viable, high-quality projects, he said.

Labour costs to go up

While various factors influence the cost of construction in India, labour emerges as a critical driver of economic growth too. Hence, as construction expands into non-metropolitan and rural areas, the supply-demand gap is narrowing, resulting in a more stable labour market and reduced wage disparities, the report observed.

Presently, labour rates are experiencing an average annual increase of 6% over the past three years, impacting construction cost by roughly 2%. The industry heavily relies on its workforce as evidenced by its expansion to approximately 71 million employees in FY2023, up from 63.98 million the previous year, owing to urbanization and growing infrastructure demands.

However, this growth is primarily observed in unskilled labor, exacerbating the shortage of skilled workers. The deficiency of vocational training institutions further impedes skill development, it said.

Construction costs are anticipated to experience a global increase in the coming year, it added.