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The "Construction Cost Guide India: 2024" by JLL reveals a significant 6% average increase in construction costs across sectors for FY 23-24, posing challenges for developers. Mumbai remains the most expensive city for construction due to soaring prices of materials like cement and steel. Jipu Jose James of JLL stresses effective cost management for project viability. Developers like Goel Ganga Developments and 4S Developers have adopted strategies like price adjustments and cost-saving measures. MRG Group and Shriram Properties have adjusted pricing strategies while focusing on value for buyers. Navigating rising costs demands innovation and adaptation, emphasising efficient project management and informed decision-making for buyers.
A recent report by JLL, a leading real estate consultancy, highlights a growing challenge for developers: rising construction costs. The report, titled "Construction Cost Guide India: 2024," predicts an average increase of 6% across various sectors in the financial year 2023-24. This increase in costs is forcing developers to become more creative in managing their projects and pricing strategies. Advertisement
The report also reveals that Mumbai continues to be the most expensive city for construction, with costs exceeding other major cities like Chennai and Pune. This can be attributed to the rising prices of essential building materials like cement, steel, and stone. These cost increases are squeezing developer margins and impacting overall project feasibility.
Jipu Jose James, Managing Director of Project and Development Services at JLL India, emphasises the importance of managing costs effectively. He states that understanding and effectively managing costs are crucial in maintaining budget control and delivering economically viable, high-quality projects. Rising costs may have a trickle-down effect, with developers potentially prioritising features that enhance the end-user experience while managing overall project budgets.
Several developers are implementing different strategies to cope with rising costs. Pune-based Goel Ganga Developments has strategically raised property prices by 5-7%, while assuring customers that these adjustments still offer value and maintain affordability. Other developers, like Gurugram's 4S Developers, are focusing on cost-saving measures through smart procurement, efficient labour utilisation, and value engineering. This involves optimising designs without compromising on quality or aesthetics. Additionally, developers with strong financial standing can leverage their buying power to negotiate better bulk purchase rates with material suppliers.
Real estate companies are also adjusting their pricing strategies to reflect the new market reality. MRG Group, a developer based in Gurugram, has increased property prices to INR 13,500 per square foot from INR 10,000 per square foot. They justify this adjustment by citing market dynamics, property enhancements, and the overall value proposition offered to buyers. Similarly, Bengaluru-based Shriram Properties has reported an industry average selling price increase of 5-6% in Bengaluru and 3-4% in Chennai. However, they've taken steps to minimise the impact on customers by focusing on value engineering and optimising spending without compromising on quality.
The rising construction cost scenario highlights the need for developers to constantly innovate and adapt. A focus on efficient project management, strategic procurement, and value engineering will be crucial for navigating this challenging environment. For buyers, understanding market trends and conducting thorough research will ensure they are making informed decisions when purchasing property.
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