Mumbai 14% higher than Hyderabad & Chennai in average construction cost
Hyderabad and Chennai have the lowest average construction costs
Mumbai, 10 March 2021: Chennai and Hyderabad are at the lower ends of the cost spectrum against which the cost of Mumbai is 14% higher. Taking into account the other metros like Bangalore, Pune, Delhi, the overall average cost increase in Mumbai is 10%, according to an analysis guidebook ‘Construction Cost Guide Book’ launched by JLL today. The higher costs in Mumbai are largely attributable to corresponding higher prices of key construction materials like cement, reinforcement steel, structural steel, stones and so on. The guidebook throws light on the market trends, construction cost of real estate assets across major markets of India and includes a cost matrix representing different style and quality levels, an analysis of market trends of the major building materials.
Cost Indices for major cities
Source: As per JLL internal cost benchmarking data
Hyderabad and Chennai have the lowest average construction costs where costs are about 14% lesser than Mumbai. The impact of COVID-19 on market benchmark rates has been neutral to significant, depending on the asset classes. Based on our analysis we have seen cost impact of 5-6% on existing green field & interior fit-out projects
“Going ahead, we see cost as one of the key drivers in real estate decisions. Many firms today are relooking at their real estate choices to optimise spend. While the true impact of pandemic on construction costs is still being discussed and debated, the general trend is obvious – construction costs is 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,” said MV Harish, Managing Director, PDS, JLL India.
The construction cost paradigm for different asset class
Average cost of constructing a residential apartment in a high- rise and mid-rise building in key cities - The average cost of construction for a luxury residential apartment in a high-rise building in Mumbai is INR 5,625 per sq. ft, while in Delhi & Pune, the price would be 4,950/sq. ft and 4,905 respectively, while in Hyderabad such a house would command INR 4,275/sq. ft. Similarly, constructing a mid-rise luxury apartment will cost INR 3,875/ sq. ft in Mumbai and INR 3,410/ sq. ft in Delhi.
Average cost of constructing a commercial building in a high- rise and medium-rise building in key cities - While constructing a medium-rise commercial building in Mumbai would cost INR 3,250/sq. ft, the price would be INR 2860/sq. ft in Delhi and INR 2470/sq. ft in Hyderabad for constructing similar property. Construction cost for a medium-rise commercial building in Delhi and Pune are almost at the same level.
Similarly, construction cost for a high-rise commercial building in Mumbai is INR 3,875/sq. ft, while it is INR 3,410/sq. ft and INR 3,379/sq. ft in Delhi and Pune. The cost of constructing a high-rise commercial property in Hyderabad is the lowest i.e. INR 2,945/sq. ft.
Impact of COVID 19 on construction cost
The impact of COVID-19 on market benchmark rates has been neutral to significant, depending on the asset classes. There has been significant cost impact of 5-6% on existing green field & interior fit-out projects which is primarily driven by procurement challenges which may have led vendors to procure from first available source at higher price, increased cost towards Health & safety (setting up of quarantine facility, sanitation, thermal scanners and like), skilled labor availability. The major impact has been on services especially long lead imported items where there are limited local sourcing of materials. The cost impact ranges from 2-3% for new projects that are undertaken in recent times. There are few challenges like idleness of plant and machinery along with enormous market competition which are compelling contractors to discount their margin as they bid for new projects.
Factors Impacting Construction Cost
- Material and transportation cost have spiked due to material demand, its nonavailability and transportation challenges; once the supply chain reinstates, the prices shall return to normal
- Additional costs are incurred to follow COVID-19 HSE protocols at work and labor camps
- Contractors are reducing the profit margin, plant and machinery cost due to prolonged idleness and competition in the market
- However, the overall delta would be 2-3% for new projects and 5-6% for existing projects as material and transportation caters to 50-60% of the total cost
- With right procurement strategy, the client could take the benefit of idleness and market competition to avail few percentages in discount from the existing prices.
The procurement strategies are evolving as clients increase their focus on time and quality. While the item rate contract remains the primary contracting model in the country, the design & build model is gaining prominence.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion, operations in over 80 countries and a global workforce of operations in over 80 countries and a global workforce of more than 91,000 as of December 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
In India, JLL has an extensive presence across 10 major cities (Mumbai, Delhi NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, Ahmedabad, Kochi and Coimbatore) and over 130 tier II & III markets with a cumulative strength of close to 12,000 professionals. Headquartered out of Mumbai, we are India’s premier and largest professional services firm specializing in real estate. Our services cover various asset classes such as commercial, residential, industrial, retail, warehouse and logistics, hospitality, healthcare, senior living, data centre and education. For further information, please visit jll.co.in.