Average construction cost up 10-12 pc in last 1 yr; may rise further by 8-9 pc: Colliers India

The average cost of construction for housing projects has risen 10-12 per cent over the last one year due to the rise in prices of raw materials like cement and steel, and may rise further by 8-9 per cent by December, according to property consultant Colliers India.Over the last one year, developers average cost of construction has risen 10-12 per cent, owing to a higher input cost due to supply-side constraints.

The average cost of construction for housing projects has risen 10-12 per cent over the last one year due to the rise in prices of raw materials like cement and steel, and may rise further by 8-9 per cent by December, according to property consultant Colliers India.

''Over the last one year, developers' average cost of construction has risen 10-12 per cent, owing to a higher input cost due to supply-side constraints. The cost of key materials like cement and steel have risen over 20 per cent yearly as of March 2022. These constitute a predominant share in the total cost of construction,'' Colliers said in a statement.

The consultant said that developers, so far, have been cautious about increasing prices as the market was recovering from the aftermath of COVID-19.

However, developers have now started feeling the pinch of rising cost and they have started reviewing their pricing strategy, it added.

''With rising material cost, developers will be compelled to increase prices as construction materials account for about 2/3rd share in the total cost of construction. Developers have already been operating on thin margins over the last few years,'' Colliers India CEO Ramesh Nair, said.

The rising cost will impact developers in the affordable and mid-market segments relatively more as they are already operating on lower margins, he added.

Nair further said, ''With wholesale price inflation (WPI) and material cost, both seeing a double-digit rise, the cost of construction can rise by a further 8-9 per cent by December 2022.'' Colliers India said that the average cost of construction of residential properties rose to Rs 2,300 per square feet in March 2022 from Rs 2,060 per square feet a year ago.

The data of average cost of construction excludes GST. The cost is for a standard premium residential building of 15 floors.

Colliers, a leading diversified professional services and investment management company, has operations in 64 countries, including India.

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