No change in residential real estate development costs in Q2 FY24

TruBoard's real estate construction cost index shows that cost pressure on developers remains light. For the quarter ending September 2023, the index rose 0.3% year over year, compared to a 1.4% contraction in the previous quarter. The largest price increase was observed in the casting of metals and finishing stones such as granite, white cement and asbestos. However, the index remained stable compared to the previous quarter. The index showed that construction costs increased by an average of 5% in FY23 compared to FY22.

Sangram Baviskar, MD, real estate practice at TruBoard Partners, said: “We believe that a flat trajectory in construction costs coupled with a positive trend in capital values can be a driving force for the real estate sector. Developers and investors can take advantage of this stability to plan and execute projects with greater certainty. The focus on cost efficiency is likely to encourage innovation and adoption of advanced construction technologies, further increasing the overall competitiveness of the industry.”

Anuj Agarwal, chief economist and head of research at TruBoard Partners, said: “Commodity inflation as measured by the WPI has bottomed out. Last year's high base effect will no longer keep inflation numbers low. Although the global economy has performed stronger than expected despite rising interest rates, risks to growth have not diminished. China's economic recovery after the coronavirus crisis was weaker than expected. Prices of raw materials, including energy, remain vulnerable to the two wars. Construction cost growth over the next three to six months is likely to remain in the 2 to 5% range.”