Construction cost up 8-9% on existing greenfield projects in Q4 2021 compared to Q4, 2020: JLL.
Cost of key construction materials increased 45-60%
Labour rates up by 10-15%, as compared to the same period last year
The highest brunt bore by Mumbai, followed by Delhi and Bangalore
Hyderabad saw a lower impact
Mumbai, 11 January 2022: Construction cost of existing greenfield and interior fit-out
projects has increased by 8-9% in Q4 2021 (Oct-Dec) as against Q4 2020 (Oct- Dec), as per
JLL’s Q4 2021 Construction Price Report.
This is primarily driven by procurement challenges, leading vendors to procure from the first
available source at a higher price, increased cost towards health and safety and skilled
labour availability. The major impact has been on services, especially Long Lead imported
items where there is limited local sourcing of materials. Long Lead Item refers to items
whose delivery/supply time is longer as they may be imported from other countries like
China, Malaysia and so on. They may also be items that are built as per design. Therefore,
these items are not bought off the shelf and take a longer time to reach construction sites.
The impact of the first wave of the pandemic on market benchmark rates has been neutral to
significant depending on the asset classes. There are a few challenges like idleness of plant
and machinery along with enormous market competition which is compelling contractors to
discount their margin as they bid for new projects. This discount is not sufficient to offset the
overall hike in construction material and labour costs.
The second wave has given an overall image that the Covid-19 restrictions are there to last
for years and with lockdown, transportation, manufacturing challenges, all the stakeholders
are anticipating material cost increase for the forthcoming months. The cost impact post-
second wave has been significant. The cost of new projects is up by 10-12% while the
existing projects went up by 8-9%. The supply chain breakdown is the key reason as the
cost of material and its freight account for 50-60% of construction budgets.
“With the combination of market re-emergence and survival from the hard-hit of Covid-19,
construction prices been quite volatile since Q1 2020 that has made investors, developers,
contractors take cautious decisions, although the price surge was far above all the
assessments. As the market slowly started to recover, the long wait for projects to start have
begun, there is always hope for prospects. The Indian construction industry is the key area
of global real estate investments, the recovery pace can double fold in the upcoming
quarters which will help all the stakeholders to narrow down the loss made in the previous
quarters since the Covid-19 outbreak. The volatility is here to stay for a while until industry
shows a steady sign of recovery along with other sectors like manufacturing, hospitality,
FMCG, infrastructure, leisure and so on,” said MV Harish, Executive Managing Director,
Project Development Services, JLL India.
Spike in raw materials cost and labour cost leading to costlier homes
The findings of JLL’s report demonstrates a price increase of overall 10-12% for new
projects and 8-9% for existing projects. Contractors are increasing the overheads and profit,
anticipating the uncertainty in the market majorly due to labour and material challenges.
The cost of labour has risen 10-15%, besides the regular increase, due to the knock-on
impact of Covid-19 protocols and its associated costs. This includes costs related to
compliance to new protocols like RT-PCR tests, idle time until test results, increased
accommodation space for the same amount of labour, quarantine facility and sanitation
measures. In addition to that, additional labour retention and transportation costs put
together have contributed to the increase.
Since Q1 2020, steel is up 45-47% to INR 62,300/MT, copper also at 70-75% to INR
745,000/MT, followed by aluminium at 55-50% to INR 203,385/MT, PVC items by 80-90% to
INR165,000/MT, and last, but not the least, fuel (primarily diesel) by a whopping 43-47% to
about INR 94/liter.
Overall Cost Impacts- the Ups and Downs
2020 Q12020 Q22020 Q32020 Q42021 Q12021 Q22021 Q32021 Q4
100%
102%
104%
106%
108%
110%
112%
114%
100%
105%
106%
105%
109%
108%
109%109%
100%
103%103%
105%
112%
110%
112%
113%
Existing Projects-Cost/SftNew Projects-Cost/Sft
Source: JLL PDS
While upsurge in construction cost per sq. ft for existing projects and new projects was at
par (105%) in Q4 2020, new project cost went up substantially, from 105% in Q4 2020 to
113% Q4 2021 translating to an 8% hike.
While the markets continue to be volatile, it is anticipated that by Q2-Q3 2022 the
construction prices will stabilize. The price rise that we have witnessed is going to be the
“new normal”.
Please click on the link to download the report - Insights to Q4 2021 construction prices
*Greenfield projects – These are new constructions including the base building and its
interiors. For examples – Residential projects, commercial buildings, hotels, schools,
manufacturing plants, warehouses and so on. Interior Fit-outs – This refers to the interiors
done typically for corporate offices. For example, may include office space for say big tech
companies and so on.
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About JLL
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 in 2020,
operations in over 80 countries and a global workforce more than 95,000 as of September 30, 2021. JLL is
the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information,
visit jll.com.
JLL is India’s premier and largest professional services firm specialising in real estate. The Firm has grown
from strength to strength in India for the past two decades. JLL India 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 and III markets with a cumulative strength of close to 12,000 professionals.
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comprehensive range of services. These include leasing, capital markets, research & advisory, transaction
management, project development, facility management and property & asset management. These
services cover various asset classes such as commercial, industrial, warehouse and logistics, data centres,
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