Despite an increase in construction costs, activities in the real estate sector have witnessed growth, according to a report by CBRE, a real estate consulting firm.
The report titled ‘India Real Estate – Variance in Construction Costs’ mentioned that the prices of cement have nearly tripled in the last 16 years, while the cost of structural steel more than doubled between April 2005 and November 2017.
Despite this, the overall stock of developed real estate in India’s leading urban centres would reach 8.2 billion sq. ft. by 2025, therefore, providing employment to approximately 17 million people across the country.
According to the report, out of six leading cities in India (Chennai, Bengaluru, Hyderabad, Pune, Mumbai and Delhi), Mumbai remains the most expensive. Construction costs in Chennai and Bengaluru are almost on par with Delhi and Pune. Variation in costs could be primarily attributed to different demand levels, proximity to supply centres as well as the efficiency of logistics networks across these cities.
“Rising demand for real estate as well as infrastructure development is expected to propel the construction industry towards a growth trajectory. Already, the implementation of GST has impacted the cost of raw materials and streamlined inter-state and import taxes, giving the industry a major boost,” said Anshuman Magazine, Chairman, India and South East Asia, CBRE.
The average cost of construction for a residential apartment in a mid-rise building was pegged at Rs 3,125/sq. ft. in Mumbai, and Rs 2,750/sq. ft. in Delhi and Pune. In Chennai and Bengaluru, the cost was Rs 2,500/sq. ft., while in Hyderabad such an apartment would cost Rs 2,375/sq. ft.
“Construction sector is one of the largest employment generators and has a strong linkage with various industries. We foresee strong growth for the sector over the next five years, owing to a thrust from the real estate and infrastructure sectors. The construction sector has already received a boost in the form of GST which has stabilised prices. Going forward, we foresee technology to play a dominant role,” said Gurjot Bhatia, Managing Director-Project Management at CBRE South Asia.
The report also highlighted some of the challenges being faced by the sector. One of the major challenges that the industry needs to overcome is the shortage of quality contractors who can complete projects within a stipulated time period.