The Indian real estate market is grappling with an 11% surge in construction costs over the past year, a shift primarily attributed to escalating labour expenses. According to Colliers India, the increase in overall costs stems largely from a 25% year-on-year rise in labour wages, alongside moderate price adjustments for essential materials like sand, brick, and wood. Notably, the cost of pivotal materials such as cement and steel has remained steady or even decreased, with cement seeing a 15% drop and steel costs down by 1%, yet the rising labour costs have heavily impacted construction budgets across the sector.
Labour now constitutes over a quarter of total construction costs, and the additional demand for skilled labour has further increased associated expenses in recruitment, training, and regulatory compliance. Industry experts highlight that the demand for qualified labour, coupled with compliance-related safety investments, has driven up costs, particularly in the residential sector. Residential developers face intensified pressure to meet high-quality standards and build amenity-rich, gated communities. As a result, construction costs in this segment have outpaced other sectors, with residential real estate witnessing an estimated 11% cost escalation in 2024.
Despite these rising costs, 2024 has seen robust supply in the commercial and industrial real estate sectors, suggesting resilient demand. Between January and September, India’s office sector recorded 37 million square feet of new completions, while the industrial and warehousing segment added another 22 million square feet. Healthy demand for Grade A developments has spurred completion rates and is motivating real estate developers to adopt technology and sustainable practices, ensuring timely delivery while managing costs.
To counter rising expenses, developers are diversifying their supply chains and turning to local sourcing. Efforts to improve sustainability are also on the rise, as companies increasingly adopt circular economy principles to optimise construction materials and reduce waste. Many developers are also investing in automation and workforce training, both of which support project efficiency and alleviate the shortage of skilled labour. As India’s real estate landscape evolves, these strategies reflect a growing commitment to sustainable, cost-efficient development in response to market pressures.
