The average cost of construction has surged by up to 11% over the past year, primarily driven by a significant 25% increase in labor costs. While prices for key construction materials such as cement, steel, copper, and aluminum have remained relatively stable, labor expenses—accounting for over one-fourth of construction costs—are stretching budgets, according to Badal Yagnik, CEO of Colliers India.
Notably, cement prices have decreased by 15%, and steel prices have dropped marginally by 1% over the last year. However, the rising costs of skilled labor, alongside investments in training, safety, and compliance, are creating financial pressures on developers.
The residential segment has seen the highest cost escalation, with an 11% year-on-year increase as of October 2024. Growing demand for premium gated communities and higher-quality standards are driving costs in this sector. Meanwhile, commercial and industrial projects continue to thrive, with 37 million square feet of new office space and 22 million square feet of industrial warehousing added in 2024.
“Developers are adopting localized sourcing, automation, and sustainability measures to counter rising costs and labor shortages,” said Vimal Nadar, Senior Director at Colliers India. These strategies are expected to optimize costs and maintain project schedules despite the challenges.
