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The construction sector in India continues to evolve amid fluctuating input costs, and the latest report from CBRE shows that greenfield real estate projects are witnessing a 2-4% increase in construction costs in 2024. This marks a significant slowdown from the 6-8% cost increases experienced during 2021-22, driven largely by easing supply chain challenges and stabilizing inflation.
Greenfield real estate projects developments on previously unused or undeveloped land have always been sensitive to changes in material costs and labour availability. In 2024, the overall construction costs for these projects have increased modestly by 2-4% year-on-year. Despite reductions in certain material prices, rising labour expenses have offset these savings, keeping overall costs elevated.
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Key Factors Affecting Construction Costs
1. Fluctuating Material Costs
According to the CBRE report, while some key materials have seen a price decline, others have experienced moderate increases. For example:
Material Cost Fluctuations in 2024
|
Material |
Annual Change (%) |
|
Cement |
-6 to -8 |
|
Steel |
-3 to -5 |
|
Aluminium |
0 to -2 |
|
Paints |
Stable |
|
Wood |
+3 to +6 |
|
Stone |
+0 to +2 |
These variations highlight the complex dynamics affecting the construction industry. Although lower costs for cement, steel, and aluminium suggest a more favourable market, the 5% increase in labour costs has effectively balanced out these savings. For developers working on greenfield real estate projects, the net effect is a modest annual rise in overall construction costs.
2. High-Rise Construction Costs
The report also outlines cost ranges for high-rise construction, which remain a critical metric for developers. In Delhi-NCR, high-rise residential projects (typically spanning 30 floors) have construction costs ranging from ₹5,500 to ₹6,100 per square foot. In contrast, mid-rise buildings (approximately 12 floors) cost around ₹3,100 to ₹3,500 per square foot. These benchmarks help developers assess project feasibility in various market segments.
High-Rise Construction Cost Ranges
|
Building Type |
Cost Range (₹ per sq. ft.) |
|
High-Rise (30 floors) |
₹5,500 - ₹6,100 |
|
Mid-Rise (12 floors) |
₹3,100 - ₹3,500 |
Industry Insights and Implications
Experts from CBRE emphasize that the slower increase in construction costs for greenfield real estate projects is a positive indicator for the market. Anshuman Magazine, Chairman and CEO – India, South-East Asia, Middle East & Africa, stated that stabilized costs, coupled with rapid urban expansion, create resilience and open up new opportunities for developers. Gurjot Bhatia, MD and Head of Project Management Advisory, Asia-Pacific at CBRE, noted that while workforce shortages remain a challenge, the overall investment in the sector continues to grow, driven by sustainability and technology.
For developers, these trends signal that even though material costs have eased slightly, the persistent rise in labour expenses means careful cost management remains crucial. Additionally, the steady cost environment supports better forecasting and planning for upcoming greenfield real estate projects, providing a clearer path to project viability and long-term profitability.
Conclusion
The CBRE report on 2024 construction cost trends offers a nuanced view of the challenges and opportunities facing greenfield real estate projects in India. While input cost reductions in materials like cement, steel, and aluminium are encouraging, the overall 2-4% cost rise propelled by increased labour expenses underscores the need for strategic cost management in new developments. As the market continues to stabilize, developers can benefit from improved predictability and enhanced planning, driving sustainable growth across India’s rapidly evolving real estate landscape.
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Ans 1. Greenfield projects are developments on previously unused land, allowing developers to build from scratch. They are sensitive to changes in material and labour costs.
Ans 2. The CBRE report indicates a modest 2-4% year-on-year increase in construction costs for greenfield projects in 2024, driven primarily by rising labour expenses.
Ans 3. Cement, steel, and aluminium have experienced price declines, which partially offset rising labour costs, although the net effect is still a modest overall cost increase.
Ans 4. Labour costs have increased by about 5% in 2024, which has counterbalanced the savings from reduced material prices, resulting in the overall 2-4% cost hike for greenfield projects.
Ans 5. Developers benefit from more predictable cost trends, but they must manage rising labour expenses carefully to maintain profitability and ensure project viability.