Chennai: Construction costs on greenfield projects saw a moderate escalation in 2024 compared to previous years, with the dip in cement, steel and aluminium prices.
In 2024, construction costs saw a marginal rise of 2-4 per cent compared to 2023. This was much lower than the 6-8 per cent cost increases witnessed in 2021 and 2022. Easing of supply chain bottlenecks and stabilising of inflationary pressures led to the moderation in cost escalation, finds CBRE.
In 2024, cement prices were down by 6-8 per cent compared to the previous year. According to India Ratings, in FY25 cement prices witnessed the sharpest price fall in almost two decades. The southern region witnessed the sharpest fall in the prices, followed by the East. The weak pricing environment may continue in FY26, though a fall similar to FY25 is not likely.
Steel prices were down by 3 to 5 per cent and aluminium prices saw a decline of up to 2 per cent in 2024. Domestic steel prices declined due to increased supply from imports and a softening global steel market. Decline in prices were particularly seen in products like Hot Rolled Coils and Cold Rolled Coils.
Meanwhile, paint costs remained stable and wood and stone prices rose by 3-6 per cent and 0-2 per cent, respectively, during the year, reflecting selective demand pressures.
Persistent shortages in skilled, semi-skilled, and unskilled labour resulted in an average 5 per cent increase in labour expenditures during 2024. This labour cost escalation effectively negated the material cost reductions, thereby sustaining elevated overall construction costs. Mumbai witnessed the highest construction cost increase of 4-6 per cent in 2024, while Delhi-NCR, Bengaluru, Chennai, Hyderabad, and Pune recorded a 3-4 per cent growth.
