International real estate advisory firm, Savills India conducted a research to estimate the cost of construction for industrial and warehousing projects across India’s top eight cities and released their findings in its latest report titled – Construction Cost Guide. The prices of the most commonly used materials in construction were estimated across the cities to arrive at the overall cost. These materials include cement, steel, crude oil, copper, glass, wood and other materials required, along with labour wages.
According to Savills, as of Q1 FY22, Mumbai and Kolkata witnessed the highest construction costs at INR 2,115 per sq.ft. for grade A warehousing space, and INR 3,295 per sq.ft. for a general manufacturing facility. This was followed by Pune that saw the costs at INR 2,100 and INR 3,265 per sq.ft. respectively.
Construction Cost (INR per sq. ft.) – city wise for grade A warehouse & manufacturing facility as of Q1 2020 and Q1 2022
|Cities||Costs (INR per sq. ft.) for Grade A Warehousing||Costs (INR per sq. ft.) for General Manufacturing|
|Q1 2020||Q1 2022||% Change||Q1 2020||Q1 2022||% Change|
Source: Savills India Industrial Research
Construction costs have increased due to rising material prices such as crude oil, steel, aluminium, cement, labour, equipment rental costs and costs of plumbing and fixtures. Additionally, COVID-19 has caused a significant shift in construction costs, resulting in slightly higher material costs and supply chain disruptions. However, when compared to its international counterparts, general manufacturing in Indian cities range from USD 453-USD 465 per sq. m whereas for Grade-A warehousing it ranges from USD 291-USD299 per sq. m as of Q1 FY22.
Industrial and warehousing is one of the most resilient segments in India. The demand for industrial and warehousing facilities is expected to remain unscathed in the long term. We expect construction costs for industrial and warehousing projects to increase in 2022. However, the magnitude of growth is dependent on material costs, labour, equipment rental costs, interest rates and other related costs.”Srinivas N, Managing Director, Industrial and Logistics, Savills India
In 2020-21, the construction sector contributed 7.6% towards the GDP. The projected increase in construction activity will further contribute significantly to the GDP in 2022-23.
While demand for industrial and warehousing facilities is expected to remain unscathed in the long term, Savills India expects construction costs for industrial and warehousing projects to increase going forward. The magnitude of this increase will be dependent on the cost of construction materials, including cement, steel, copper and aluminum, labour, equipment rental costs, interest rates and other related costs.