The TruBoard Real Estate Construction Cost Index shows that cost pressures on developers remain benign. For the quarter ended September 2023, the index has increased by 0.3% compared to a year ago Vs a 1.4% contraction witnessed in the previous quarter. The biggest increase in prices was seen in metal casting, finishing stones like granite, white cement and asbestos. However, the index remained flat compared to the preceding quarter. The index showed that construction costs have increased by an average of 5% in FY23 over FY22.
Sangram Baviskar, Managing Director, Real Estate Practice at TruBoard Partners said, “We feel that flattish trajectory of construction cost along with positive trend in capital values can be a driving force for the real estate industry. Developers and investors can leverage this stability to plan and execute projects with greater certainty. The focus on cost efficiently is likely to encourage innovation and adoption of advanced construction technologies, further enhancing the overall competitiveness of the industry.”
Anuj Agarwal, Chief Economist and Head of Research at TruBoard Partners said, “Commodity inflation as gauged by WPI has bottomed out. The high base effect of last year will no longer keep the inflation prints low. While the global economy has fared stronger than expected despite the rising interest rates, risks to growth have not diminished. China’s post-COVID economic recovery has been weaker than expected. Commodity prices including energy commodities remain vulnerable to the 2 wars. Increase in construction costs over the next 3-6 months is likely to remain rangebound 2-5%.”
