Greenfield Project Construction Costs Escalated 2-4% in 2024 Due to Rising Input Expenses: CBRE Report
The construction costs for greenfield real estate projects in India increased by 2-4% in 2024 due to higher input costs, according to a report by CBRE. The report, India Construction Cost Trends 2024-25: Navigating Costs in a Transforming Landscape, highlights a shift from the 6-8% increase observed during 2021-22. This shift has been attributed to stabilizing inflation and an improvement in supply chain conditions.
Greenfield real estate projects refer to developments built on previously unused or undeveloped land. These projects are integral to urban expansion, and their cost variations significantly impact the real estate sector’s growth.
Factors Influencing Cost Changes
Several factors have contributed to the cost variations in 2024. While the prices of key construction materials, such as cement, steel, and aluminium, declined slightly, the persistent shortage of skilled and unskilled labour led to an overall increase in construction expenses.
Material Cost Fluctuations:
- Cement prices decreased by 6-8%.
- Steel prices declined by 3-5%.
- Aluminium costs dropped by 0-2%.
- Paint prices remained stable.
- Wood prices increased by 3-6%.
- Stone prices rose by 0-2%.
Despite some reductions in material prices, labour costs increased by an average of 5% in 2024. This rise in labour expenses offset the benefits of declining material costs, leading to a continued increase in overall construction costs.
Implications for the Real Estate Sector
According to Anshuman Magazine, Chairman and CEO – India, South-East Asia, Middle East & Africa at CBRE, the real estate sector is experiencing stable construction costs while expanding rapidly. He noted that sustained demand, investment in high-quality developments, and a focus on sustainability and technology are shaping the industry’s resilience.
One of the challenges faced by developers is the volatility in material prices. While some essential materials have seen price moderation, fluctuating costs continue to impact project budgets. Additionally, the shift towards sustainable building practices and technological advancements is influencing construction expenses.
The report highlighted cost estimates for different types of residential projects in Delhi-NCR. High-rise residential construction (30 floors) in Delhi-NCR costs between ₹5,500-6,100 per sq. ft., while mid-rise projects (12 floors) are estimated at ₹3,100-3,500 per sq. ft. These costs vary depending on the location, design specifications, and materials used.
Labour Shortages and Cost Escalation
One of the persistent challenges in the construction sector has been the shortage of skilled, semi-skilled, and unskilled workers. The increase in wages due to labour shortages has become a major factor in rising construction costs. Developers are increasingly focusing on automation, prefabrication, and new construction techniques to mitigate these challenges. However, these solutions require significant investment and are not universally adopted across projects.
Developer Strategies to Manage Costs
Developers are adopting several strategies to navigate rising costs and ensure project viability. These include:
- Material Sourcing Adjustments: Developers are optimizing procurement strategies to take advantage of cost fluctuations.
- Technology Integration: The use of digital tools, automated processes, and Building Information Modeling (BIM) is helping streamline operations.
- Sustainability Measures: Energy-efficient designs and sustainable construction practices are gaining traction, influencing material selection and construction methodologies.
- Financial Planning: Flexible financing models and risk assessment strategies are being implemented to adapt to cost changes.
Market Stability and Future Outlook
According to Gurjot Bhatia, Managing Director and Head of Project Management Advisory, Asia-Pacific at CBRE, understanding cost variations across different asset types—such as residential, commercial, retail, and warehousing—is essential for market stability. The construction sector continues to attract investment, but adapting to evolving cost structures remains a key challenge for developers.
As India’s urban areas continue to expand, construction cost trends will play a crucial role in shaping future developments. The sector’s ability to balance cost efficiency with quality and innovation will determine its growth trajectory in the coming years.
