According to a report by Savills India, construction costs for Grade A warehousing have increased 9.26% to 10.44% on average with Mumbai and Kolkata seeing the highest construction costs for industrial and warehousing spaces.
Savills India researched to evaluate the cost of construction for industrial and warehousing projects across India’s top eight cities.
The costs of the most commonly used materials in construction were evaluated across the cities to arrive at the overall price. These materials include crude oil, steel, copper, cement, glass, wood, and other materials needed, along with labour wages.
Industrial and warehousing are one of the most resilient segments in India. The demand for industrial and warehousing units is likely to remain unscathed in the long term. We anticipate construction costs for industrial and warehousing projects to grow in 2022. However, the growth is dependent on material costs, labour, equipment rental costs, interest rates, and other related costs, said Srinivas N, Managing Director, Industrial and Logistics, Savills India.
As of Q1 2022, Mumbai and Kolkata saw the highest construction prices at Rs 2,115 per sq ft for grade-A warehousing space and Rs 3,295 per sq ft for a general manufacturing unit. This was followed by Pune, which saw the prices at Rs 2,100 and Rs 3,265 per sq ft respectively, as per Savills India.
Construction costs have risen due to rising material costs such as crude oil, cement, steel, aluminium, labour, equipment rental costs, and prices of plumbing and fixtures. Also, Covid-19 has caused a major shift in construction costs, resulting in slightly higher material prices and supply chain disruptions.
However, when compared to its international counterparts, general manufacturing in Indian cities varies from $453- $465 per sq m, whereas for Grade-A warehousing it varies from $291-$299 per sq m as of Q1 2022.
The Covid-19 crisis had minimal effect on the construction activities of industrial and warehousing projects. In terms of growth in construction prices for general manufacturing, it varies between 7.72% to 8.68%, while grade-A warehousing construction costs saw a rise between 9.26% and 10.44% from Q1-2020 to Q1-2022 across cities. This increase can be attributed to the rise in steel costs with other construction materials and commodities, including labour alongside additional provisions for Covid relevant health and safety guidelines, said Sumit Rakshit, Managing Director, Project Management Services, Savills India.
The construction sector contributed 7.6% to the gross domestic product (GDP) in 2020-21. The projected growth in construction activity will further contribute immensely to the GDP in 2022-23.