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Cost of construction highest in Mumbai, 14% higher than Hyderabad and Chennai: JLL

There has been a 5-6% cost increase in greenfield and interior fit-out projects due COVID-19

Representative image

Representative image

The cost of construction is highest in Mumbai across asset classes compared to other metros primarily on account of steep prices of key construction materials like cement, reinforcement steel, structural steel, stones among others.

Chennai and Hyderabad are at the lower ends of the cost spectrum against which the cost of Mumbai is 14 percent higher. Taking into account the other metros like Bengaluru, Pune, Delhi, the overall average cost increase in Mumbai is 10 percent, according to an analysis guidebook Construction Cost Guide Book by JLL.

The higher costs in Mumbai are largely attributable to corresponding and so on. The guidebook throws light on the market trends, construction cost of real estate assets across major markets of India and includes a cost matrix representing different style and quality levels, an analysis of market trends of the major building materials, it said.

Hyderabad and Chennai have the lowest average construction costs where costs are about 14% lesser than Mumbai. The impact of COVID-19 on market benchmark rates has been neutral to significant, depending on the asset classes.

“Going ahead, we see cost as one of the key drivers in real estate decisions. Many firms today are relooking at their real estate choices to optimise spend. While the true impact of pandemic on construction costs is still being discussed and debated, the general trend is obvious – construction costs are on the rise. Customer spends are going to be more directed towards aspects that give a better employee experience,” said MV Harish, Managing Director, PDS, JLL India.


Average cost of constructing a residential apartment in a high- rise and mid-rise building in key cities

The average cost of construction for a luxury residential apartment in a high-rise building in Mumbai is Rs 5,625 per sq. ft, while in Delhi and Pune, the price would be Rs 4,950 per sq. ft and Rs 4,905 per sq ft respectively, while in Hyderabad such a house would command Rs 4,275 per sq. ft. Similarly, constructing a mid-rise luxury apartment will cost Rs 3,875 per sq. ft in Mumbai and Rs 3,410 per sq. ft in Delhi.

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As for the average cost of constructing a commercial building in a high- rise and medium-rise building in key cities, while constructing a medium-rise commercial building in Mumbai would cost Rs 3,250 per sq. ft, the price would be Rs 2860 per sq. ft in Delhi and Rs 2470 per sq. ft in Hyderabad for constructing similar property. Construction costs for a medium-rise commercial building in Delhi and Pune are almost at the same level.

Similarly, construction cost for a high-rise commercial building in Mumbai is Rs 3,875 per sq. ft, while it is Rs 3,410 per sq. ft and Rs 3,379 per sq ft in Delhi and Pune. The cost of constructing a high-rise commercial property in Hyderabad is the lowest at Rs 2,945 per sq. ft, the guidebook said.

Impact of COVID 19 on construction cost

The impact of COVID-19 on market benchmark rates has been neutral to significant, depending on the asset classes. There has been significant cost impact of 5-6% on existing green field and interior fit-out projects which is primarily driven by procurement challenges which may have led vendors to procure from first available source at higher price, increased cost towards health and safety (setting up of quarantine facility, sanitation, thermal scanners and like), skilled labour availability.

The major impact has been on services especially long lead imported items where there are limited local sourcing of materials. The cost impact ranges from 2-3% for new projects that are undertaken in recent times. There are few challenges like idleness of plants and machinery along with enormous market competition which are compelling contractors to discount their margin as they bid for new projects, it said.

Factors impacting construction cost include material and transportation cost have spiked due to material demand, its non availability and transportation challenges; once the supply chain reinstates, the prices shall return to normal, it said.

Additional costs are incurred to follow COVID-19 HSE protocols at work and labour camps. Contractors are reducing the profit margin, plant and machinery cost due to prolonged idleness and competition in the market. However, the overall delta would be 2-3 percent for new projects and 5-6 percent for existing projects as material and transportation caters to 50-60 percent of the total cost, it said.

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Moneycontrol News
first published: Mar 10, 2021 02:40 pm
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