building materials: major building materials like steel, cement and labor facing inflationary pressures: report

Major building materials, including steel, cement and labor, are facing inflationary pressures, which is largely attributed to the growing scarcity of raw materials and global material prices, in addition to logistical challenges and rising fuel prices.

With the onset of the pandemic causing a sudden slowdown in economic activity globally, it was abundantly clear that commodities would go through a period of market turbulence.

Among India’s key cities, Chennai is at the low end of the cost scale against which Mumbai’s cost is 14% higher. Taking into account other metros like Bangalore, Pune and Delhi, the overall average cost increase in Mumbai is 10-12%, a study by JLL India has shown.

Over the past year, the built environment has remained heavily loaded with an increase in the prices of major key construction materials, which has led to large-scale cost uncertainty in the Indian construction industry.

Since the first quarter of 2020, steel prices increased by 45-47% to Rs 62,300 per metric ton, copper increased by 70-75% to Rs 745,000 per metric ton, followed by an increase 50 to 55% of aluminum prices at Rs 203,385 per metric ton. metric ton, fuel prices (mainly diesel) increased by 43-47% to about Rs 94 per litre.

Labor cost also increased by 12-15%, in addition to the steady increase, due to the impact of COVID-19 protocols and associated costs. This includes costs related to compliance with new protocols such as RT-PCR testing, idle time until test results, increased hosting space for the same amount of work, facilities quarantine and sanitation measures. Additionally, additional labor retention and transportation costs combined contributed to the increase.

“Going forward, we see cost as a key driver of real estate decisions. If you really see the overall development of the project and the costs of the project, the materials represent almost 60% of the total cost of construction and we have seen these materials increase randomly. There was a cost overrun on the projects. Now it is beyond the contingency inflation anticipated during the planning phase. Projects have been delayed for the past two years due to COVID-19 and the current geopolitical scenario is also impacting that,” said MV Harish, Managing Director, PDS, JLL India.

The average construction cost of a luxury residential apartment in a high-rise building in Mumbai is Rs 5,975 per sq ft, while in Delhi and Pune the price would be Rs 5,725 per sq ft and Rs 5 450 respectively. In Hyderabad, such a house would cost Rs 5,300 per square foot.

Similarly, building a medium-sized luxury apartment will cost Rs 4,175 per square foot in Mumbai and Rs 4,000 square feet in Delhi.

While constructing a mid-rise commercial building in Mumbai would cost INR 3,675/sqm. ft, the price would be Rs 3,525 per sq ft in Delhi and Rs 3,250 per sq ft in Bangalore for the construction of a similar property. The construction costs of mid-rise commercial buildings in Hyderabad and Bangalore are almost at the same level.

Similarly, the construction cost of a high-rise commercial building in Mumbai is Rs 4,175 per square foot, while it is Rs 3,975 per square foot and Rs 3,800 per square foot in Delhi and Pune. Construction cost of high rise commercial property in Chennai is lowest at Rs 3,650 per sq ft

The industrial, residential and warehousing sectors have seen a significant increase in investment, accounting for around 40% of overall investment this year, with total investment approaching Rs 37,000 crore. At the same time, commercial office space remained the most preferred asset type in real estate.