The cost of key materials such as cement and steel has increased by over 20% annually since March 2022
The cost of key materials such as cement and steel has increased by over 20% annually since March 2022
Average construction costs for residential projects have risen 10-12% over the past year due to increased commodity prices such as cement and steel, and could rise another 8-9% by December, according to property consultant Colliers India.
“Over the past year, developers’ average construction costs have increased by 10-12%, reflecting higher input costs due to supply constraints. The cost of key materials such as cement and steel have increased by over 20% annually since March 2022. These account for a predominant share of the overall construction costs,” Colliers said in a statement.
The advisor said developers have been wary of raising prices so far as the market recovers from the effects of COVID-19.
However, developers have now started to feel the rising costs and they have started to review their pricing strategy, she added.
“As the cost of materials increases, developers will be forced to raise prices as building materials account for about 2/3 of the total construction cost. Developers have been operating on low margins for the past few years,” said Ramesh Nair, CEO of Colliers India.
The rising costs will hit developers in the affordable and mid-market segments relatively harder as they are already operating at lower margins, he added.
Mr Nair went on to say: “With wholesale price inflation (WPI) and material costs both posting double-digit increases, construction costs may rise another 8-9% by December 2022.” According to Colliers India, the average construction cost for residential property increased to ₹2,300 per square foot in March 2022 from ₹2,060 per square foot a year ago.
Average construction cost data excludes GST. The cost is for a standard premium residential building with 15 floors.
