The costs of key construction materials
As of November 2022, cost of construction has increased by 28% which is higher than the pre-pandemic (November 2019) levels; but continues to be stable compared to March 2022. The costs of key construction materials have jumped 32% in a span of three years, affecting margins and operational schedules of construction companies. The Government’s efforts in reducing exports and cutting import duties etc have kept raw material costs in check over the last few months.
  • Costs of key construction materials declined 8% since March’22
  • Construction costs remain stable since March’22
  • Costs likely to remain volatile for next 6-18 months
 
As of March 2022, construction costs rose 10-12% YoY, owing to a 20% increase in key material costs. Key construction materials such as Cement, Steel, Aluminium, and Copper saw a significant increase, along with fuel and labour costs, due to geopolitical issues, inflation etc. This created a challenge for developers who were facing high debt and liquidity concerns.

The costs of key construction materials

However, by November 2022, overall costs of key construction materials (Steel, Cement, Aluminium, and Copper) declined by 8%, as compared to March 2022. Aluminium registered the highest decline of 55%, followed by Steel at 6%. However, Cement and Copper costs increased by 9% and 3%, respectively, along with labour costs. This, coupled with decreased fuel costs, have kept the overall construction costs stable since March 2022.

The costs of key construction materials

“Costs of key construction materials are likely to remain volatile for the next few months due to uncertainties created by geopolitical issues, persistent lockdowns in China, and a probable global recession. Prices of key construction materials will hinge on multiple factors, including global economic situation, inflation rates, and supply constraints. Hence, developers are likely to push new launches till the input prices decline further, as any fresh surge in the cost of construction materials would impact the timely delivery of ongoing projects and disrupt their cashflows, resulting in increase in housing prices,” says Ramesh Nair, Chief Executive Officer, India, and Managing Director, Market Development, Asia, Colliers.

The costs of key construction materials

“Developers are planning their projects well in advance, and aiming timely project completions to cater to the surging demand. They are increasingly adopting Just-In-Case approach to store materials well in advance to avoid supply bottlenecks and unexpected price hikes,” informs Jatin Shah, Chief Technical Officer, India & Managing Director, Technical Due Diligence, Colliers.

The costs of key construction materials

According to Vimal Nadar, Senior Director & Head of Research, India, Colliers, “Residential prices have been on the rise, increasing 6% YoY in Q3 2022, led by a combination of increased input costs and robust demand. Looking ahead, prices may be more or less stable for some quarters as the market is now seeing increasing interest rates. At the same time, some investor-markets with continued demand may continue to see some increase in prices. In the industrial sector, rents can see an upward movement, led by robust demand and high costs.”
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