CBRE South Asia Pvt. Ltd. has reported a 2-4% rise in greenfield construction costs in 2024 compared to 2023, a decline from the 6-8% hikes in 2021-22. The report also noted a dip in prices of key materials like cement, steel, and aluminium, while paint prices remained steady.
However, wood and stone saw price increases of 3-6% and 0-2%, respectively. A 5% rise in labour costs due to ongoing shortages in skilled and unskilled workers offset these benefits, keeping overall construction costs high. The report also analyzed trends across major real estate segments and factors shaping the current cost landscape.
In the calendar year 2024, greenfield construction projects in India experienced a modest cost increase of approximately 2-4%. This uptick is primarily attributed to rising labor expenses, even as material costs showed a decline.
Labor Costs: A Primary Contributor
The construction sector has been grappling with workforce shortages, leading to increased labor costs. These shortages have been exacerbated by factors such as urban migration patterns and a limited influx of skilled workers. The heightened demand for labor, coupled with its limited availability, has driven up wages, thereby increasing overall project costs.
Material Costs: A Counterbalancing Factor
Interestingly, while labor costs have risen, material costs have shown a decline. This reduction can be attributed to stabilized supply chains and decreased prices for key construction materials. Despite this decline, the savings on materials have not been sufficient to offset the increased labor expenses, resulting in a net rise in construction costs.
Global Economic Influences
Global economic conditions have also played a role in shaping construction costs. For instance, fluctuations in currency values can impact the cost of imported materials. A weaker domestic currency makes imports more expensive, thereby influencing overall project budgets. Additionally, international trade policies and tariffs can affect material prices, further contributing to cost variability.
Technological Advancements and Efficiency
To mitigate rising costs, the construction industry is increasingly adopting technological solutions aimed at enhancing efficiency. The integration of Building Information Modeling (BIM), automation, and prefabrication techniques has the potential to streamline processes, reduce waste, and optimize resource utilization. These advancements can help counterbalance cost escalations by improving productivity and reducing reliance on manual labor.
Sustainability and Green Building Practices
There is a growing emphasis on sustainability within the construction sector. Implementing green building practices not only addresses environmental concerns but can also lead to long-term cost savings. Energy-efficient designs and sustainable materials may have higher upfront costs but offer reduced operational expenses over time. This shift towards sustainability reflects a broader industry trend towards responsible construction practices.
Future Outlook
Looking ahead, the construction industry is expected to continue facing challenges related to labor availability and cost management. However, ongoing investments in technology and a focus on sustainable practices may help mitigate some of these issues. Stakeholders will need to adapt to these evolving dynamics to ensure the successful execution of greenfield projects in the future.
Greenfield construction costs have risen marginally by 2-4% in CY 2024 due to higher material prices, labor costs, and regulatory changes. Despite inflationary pressures, improved supply chain efficiencies and technological advancements have helped moderate the increase. Developers are adapting by resilient, with steady demand driving continued investments in new infrastructure and residential projects across key urban and industrial hubs.
In summary, the 2-4% increase in greenfield construction costs in 2024 underscores the complex interplay of labor dynamics, material pricing, and broader economic factors. Addressing these challenges requires a multifaceted approach, incorporating technological innovation, strategic planning, and a commitment to sustainability.
Group Media Publication
Construction, Infrastructure and Mining
General News Platforms – IHTLive.com
Entertainment News Platforms – https://anyflix.in/
%20/23%20cimr%204.jpg "India is selected to host the ICCC Conference in 2027.")