Cost of construction up 10-12% YoY; surging cost likely to push up real estate prices
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* Cost of key materials like cement and steel have risen over 20% YoY in March 2022
* So far, developers have been cautious about increasing prices as the market was recovering from the aftermath of Covid-19.
* Cost of construction to rise by a further 8-9% by December 2022
Over the last one year, developers’ average cost of construction has risen 10-12%, owing to higher input cost due to supply-side constraints. This surge in cost comes at a time when developers have been under pressure due to higher debt and liquidity concerns over the last few years. The cost of key materials like cement and steel have risen over 20% yearly as of March 2022. These constitute a predominant share in the total cost of construction. So far, developers 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 started reviewing their pricing strategy.
Escalation in key input cost
Note: Costing for steel, cement, copper and aluminum is based on dealer-level cost as per Colliers’ internal costing framework; Overall values are exclusive of GST
Source: Colliers “With rising material cost, developers will be compelled to increase prices as construction materials account for about 2/3 rd share in the total cost of construction.
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