CBRE: Streamlining Construction Processes for Cost Efficiency & Growth

CBRE examines how innovative solutions and streamlined permitting processes are paving the way for standardized and manageable construction costs in India, supported by government initiatives.

South-East Asia, Middle East & Africa, CBRE
Innovative solutions and streamlined permitting processes are paving the way for standardized and manageable costs in India’s construction sector, backed by government support through incentives, creating a favourable environment.

Anshuman Magazine - Chairman & CEO - India, South-East Asia, Middle East & Africa, CBRE

India's construction industry is a crucial pillar of the nation's economic framework, showcasing exceptional resilience and adaptability in recent years. Contributing approximately 9% to India's GDP, the sector has shown robust growth, with year-on-year construction output increasing by 5.7% in 2022-23 and projections for 2023-24 indicating a significant rise of 13.3%.

Employing ~51 million people, the construction sector is India's second-highest employment generator, expected to surpass 60 million by 2025. Additionally, it plays a pivotal role in infrastructure development, with an investment budget of USD 1.4 trillion under the National Infrastructure Plan (NIP), supporting demand for allied industries such as cement, steel, building materials, electrical equipment, machinery, and services.

As the construction sector evolves, it is addressing labour costs through enhancements in operational efficiencies, technological advancements, and skill development. This proactive shift towards technology, innovation, and sustainability aligns with future needs, setting the stage for transformative trends. Adopting Artificial Intelligence (AI) is reshaping traditional practices by enhancing project management, optimizing resource allocation, and minimizing delays.

The integration of robotics and automation streamlines construction processes, from bricklaying to repetitive tasks, leading to improved efficiency and reduced labour costs. In parallel, employers are adopting innovative recruitment strategies by collaborating with vocational training institutions and educational partners to promote career prospects, thereby increasing wages, benefits, and incentives for skilled labour.

In addition to this, the construction industry is rapidly adopting innovative technologies like Building Information Modelling (BIM) and digital project management tools. Equipping the workforce with the skills to leverage these advancements optimises workflows and positions us at the forefront of the industry.

Moreover, various factors influence real estate construction costs, including supply-demand dynamics, commodity price volatility, labour cost fluctuations, and local market conditions. During periods of high demand, construction costs rise to mitigate risks, while contractors may lower prices during low demand to sustain their business.

Local market dynamics, such as prolonged monsoons, political climate, and legislative constraints, significantly impact construction costs compared to national averages. The cyclical nature of the construction sector often causes it to lag behind the overall economy, resulting in stable prices even during economic shifts. This stability was evident last year when construction prices rose despite an overall economic slowdown.

Incorporating a holistic approach towards sustainability at the project planning stage can reduce overall construction costs by approximately 10-12%. Key solutions include energy efficiency through on-site renewables, water efficiency measures like low flow fixtures and rainwater harvesting, waste management strategies, green procurement policies, and improving indoor air quality. These measures not only promote sustainability but also enhance cost-effectiveness and stakeholder collaboration. As the demand for residential, commercial, and industrial properties grows, developers will launch new construction projects, increasing activities across various real estate sectors.

By 2026, the total stock across commercial, residential, and industrial sectors is expected to surpass 1,540 million square feet, with the residential sector alone projected to exceed 5,300 million square feet. This expansion will also lead to ancillary construction activities, creating employment opportunities and stimulating economic growth.

The construction industry in India is adopting innovative solutions and streamlined processes, paving the way for standardized and manageable costs. Government support through incentives for sustainable building materials and streamlined permitting processes is likely to create a favourable environment, tempering overall costs.

Overall, the combination of market dynamics, industry adaptations, technological advance- ments, and supportive policies is expected to contribute to the normalization of construction costs, allowing for better cost predictability and improved planning for construction projects.
NBM&CW - July 2024

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