Despite rising construction costs, India to become a hotspot for investment says- JLL

While COVID-19 has proved as a major deterrent for the growth across all the sectors of the economies world over, it is anticipated that the road to recovery has already started, particularly in terms of India. The recently published Construction Cost Guide Book India 2021 by JLL India mentions that the Indian real estate sector is growing in all sectors; commercial, industrial and data centre business and is heading to a new high.

Also read: 2021 Construction and Building Material Industry Trends in India

As all the sectors across the globe regardless of the industries they fall in shift their focus to India, the investment in Indian Real Estate are leading to its best ever returns. The REIT by various investors and developers was oversubscribed showing the potential of Indian real estate sector in the recent times.

This has come despite the fact that the construction cost has become significantly higher in the recent times in metro cities due to the issues caused by the pandemic. According to the report, there is a cost impact of 5-6% on existing green field & interior fit-out projects primarily due to procurement challenges which may have led vendors to procure from first available source at higher price, increased cost towards Health & safety (setting up of quarantine facility, sanitation, thermal scanners and like), skilled labour availability. The major impact has been on services especially long lead imported items where there are limited local sourcing of materials.

Also read: Data Centres: The Most Sought After Alternative Real Estate Asset In India

The cost impact ranges from 2-3% for new projects that are undertaken in recent times. The report also suggests Mumbai as the costliest city in terms of rising construction costs as the cost of construction is highest in Mumbai which is on average 10% higher than other metros, across asset classes. Hyderabad and Chennai have the lowest average construction costs where costs are about 14% lesser than Mumbai. The higher costs in Mumbai is largely attributable to corresponding higher prices of key construction materials like Cement, reinforcement steel, structural steel, stones and like.

Also read: House Sales Will Rise Over the Next Six Months

Source: JLL Construction Cost Guide

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