Hyderabad lowest in construction cost

Constructing residential and commercial buildings in the city costs 14% lesser than Mumbai

Hyderabad: Hyderabad has the lowest average construction cost in the country compared to all the major metros and almost 14 per cent lesser than Mumbai, which is the most expensive city in terms of construction.

The higher costs in Mumbai are largely attributable to corresponding higher prices of key construction material such as cement, reinforcement steel, structural steel and stones.

According to JLL research, the average cost of construction for a luxury residential apartment in a high-rise building in Mumbai is Rs 5,625 per sq ft, while in Hyderabad such a house would cost just Rs 4,275 per sq ft. Compared to other metros such as Bengaluru, Pune and New Delhi, the overall average construction cost increase in Mumbai is estimated at 10 per cent.

While constructing a medium-rise commercial building in Mumbai would cost Rs 3,250 per sq ft, the cost would be Rs 2,860 per sq ft in Delhi and Rs 2,470 per sq ft in Hyderabad for constructing similar property.

Similarly, construction cost for a high-rise commercial building in Mumbai is Rs 3,875 per sq ft, while it is Rs 3,410 per sq ft and Rs 3,379 per sq ft in Delhi and Pune, respectively. The cost of constructing a high-rise commercial property in Hyderabad is the lowest at Rs 2,945 per sq ft.

“Going ahead, we see cost as one of the key drivers in real estate decisions. Many firms today are relooking at their real estate choices to optimise spend. While the true impact of pandemic on construction costs is still being discussed and debated, the general trend is obvious – construction costs are on the rise. Understanding and managing costs are key to keeping budgets under control and delivering an economic and quality product,” said MV Harish, MD, Project & Development Services, JLL India.

Procurement-driven costs

There has been a significant cost impact of 5-6 per cent on ongoing greenfield and interior fit-out projects, which is primarily driven by procurement challenges, which may have led vendors to procure from first available source at a higher price, increased cost towards health and safety due to Covid-19 and skilled labour availability, he added.

The major impact has been on services, especially imported items where there is limited local sourcing of materials, JLL’s real-time study covering over 200 project budgets across major cities (including Hyderabad) during Q4 2020, showed.

Material and transportation costs have spiked in the metros due to material demand, its non-availability and transportation challenges, once the supply chain reinstates, the prices shall return to normal, expects JLL India.

According to Motilal Oswal Real Estate, the last few months have witnessed a spurt in demand for residential real estate. Recovery rate is close to 90 per cent of pre-Covid for residential properties. While multiple reasons such as effective pricing, interest rates at an all-time low and flexible office policies are boosting demand, the biggest driver is the increased emotional value of home ownership.

With the residential demand due to pick up in the coming quarters, cities such as Hyderabad, which have competitive advantages of enabling low cost of construction, may attract both developers and individuals to take up construction activity.

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