Covid-19 has led to an increase in the cost of construction, according to the Construction Cost Guidebook India published by JLL on Wednesday. According to the report, the cost of construction of greenfield and interior fit-out projects have gone up by 5-6% due to covid-19. The pandemic led to a halt in construction activities and abrupt closure of certain construction sites and interruption in supply chains. The rise in cost can be attributed to the procurement challenges faced by the vendors as they may have to procure from the first available source at a higher price. Also, the increased cost towards health and safety (setting up of quarantine facility, sanitation, thermal scanners and like), and skilled labour availability may have attributed to the increase in the cost of construction. Material and transportation costs have also spiked due to demand and non-availability and transportation challenges. Once the supply chain reinstates, the prices shall return to normal, says the report.
The report also analyses the cost of construction across major cities. The cost of construction is the highest in Mumbai city. According to the report, the average cost of construction for a luxury residential apartment in a high-rise building in Mumbai is Rs5,625 per square feet. The cost of construction in Mumbai is on average 10% higher than all other cities, across asset classes. The cost of construction in Delhi and Pune, would be Rs4,950 per square feet and Rs4,905 per square feet respectively.
Also Read | The churn is on at the Kota factory
In Hyderabad, meanwhile, such a house would command Rs4,275 per square feet.
MV Harish, managing director, PDS, JLL India, said, “Going ahead, we see cost as a key driver in real estate decisions. Many firms today are relooking at their real estate choices to optimize 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. Understanding and managing costs are key to keeping budgets under control and delivering an economic and quality product.”