Mumbai and Kolkata saw the highest construction costs at Rs 2,115 per sq.ft. for grade A warehousing space and Rs 3,295 per sq.ft. for a general manufacturing facility. This was followed by Pune that saw the costs at Rs 2,100 and Rs 3,265 per sq ft, respectively, according to a Savills India report titled 'Construction Cost Guide'.
Construction costs have increased due to rising material prices such as crude oil, steel, aluminium, cement, labour, equipment rental costs and costs of plumbing and fixtures. Additionally, COVID-19 has caused a significant shift in construction costs, resulting in slightly higher material costs and supply chain disruptions.
However, when compared to its international counterparts, general manufacturing in Indian cities range from $453- $465 per sq. m whereas for Grade-A warehousing it ranges from $291-$299 per sq. m as of Q1 2022.
Construction cost for grade A warehouse increased the maximum in Kolkata (10.44 percent), followed by Pune (9.95 percent) and Ahmedabad (9.92 percent). The costs for general manufacturing went up significantly in Ahmedabad (8.68 percent), Mumbai (8.57 percent) and Pune (8.47 percent), the report said.
“Industrial and warehousing is one of the most resilient segments in India. The demand for industrial and warehousing facilities is expected to remain unscathed in the long term. We expect construction costs for industrial and warehousing projects to increase in 2022. However, the magnitude of growth is dependent on material costs, labour, equipment rental costs, interest rates and other related costs,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
“The COVID-19 crisis had minimal impact on construction activities of industrial and warehousing projects. In terms of increase in construction costs for general manufacturing, it ranges between 7.72 percent to 8.68 percent while grade A warehousing construction costs witnessed an increase between 9.26 percent and 10.44 percent from Q1-2020 to Q1-2022 across cities. This rise can be attributed to the increase in steel prices with other construction materials and commodities, including labour alongside additional provisions for COVID appropriate health and safety guidelines,” said Sumit Rakshit, Managing Director, Project Management Services, Savills India.
In 2020-21, the construction sector contributed 7.6 percent towards the GDP. The projected increase in construction activity will further contribute significantly to the GDP in 2022-23.
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