According to a report titled Project Management 2.0 - Driving Value in the New Normal Era by Global Commercial Real Estate Services (CBRE), in Q3 2022, the construction costs of ongoing greenfield projects increased by 5-7 percent. Mumbai witnessed the highest range of overall greenfield construction costs across residential, office space and warehousing sectors in the third quarter of 2022.
"Owing to a sustained recovery in contact-intensive sectors, gross value added (GVA) at basic prices for construction services expanded by 16.8 percent year-on-year (YoY) in Q1 2022-23 and was 1.2 percent above the pre-pandemic level," the report added.
While labour costs increased by 8-10 percent, reinforcement steel prices climbed by about 20 percent YoY during Q3 2022. The report added that greenfield costs are expected to go up by 4-5 percent in 2023.
CBRE forecasts a marginal rise in the overall construction costs during 2023 across cities, with Mumbai likely to witness the sharpest rise.
Gurjot Bhatia, MD, Project Management, India, Southeast Asia, Middle East & Africa, CBRE, informed that the construction sector contributes 8 percent to India's GDP and there has been a continuous rise in foreign direct investment (FDI) in real estate and construction. Amid ongoing geopolitical complexities, CBRE anticipates that material prices may moderate in 2023, with expectation of longer-than-usual lead times for material delivery and short-term labour scarcity.