Despite Rise In Construction Cost, Real Estate Will Show Robust Growth, Says CBRE Report

real estate
real estate

Despite the steep rise in the cost of construction over the past couple of years, the Indian real estate is far from slowing  down. Post the statement by Union minister, that the Indian RE is expected to contribute to 11% of GDP by 2020 comes another report published in September, 2018. IT states that the overall stock of developed real estate in India’s urban centers will touch 8.2 billion sq ft by 2025.

The report, titled “India Real Estate – Variance in Construction Costs,”- CBRE India also notes that the contribution of real estate sector to India’s GDP by 2025 will be around 13 percent and will employment to approximately 17 million people across the country. Chennai, Bengaluru, Hyderabad, Pune, Mumbai, and Delhi have emerged as the most expensive cities in the terms of construction cost.

In fact, Mumbai is leading this list with the average cost of construction for a residential apartment in a mid-rise building at Rs 3,125 per sq ft. Delhi and Pune stand on the same platform with the average cost of construction being Rs 2,750 per sq ft.

The difference in the cost is attributed to the different demand levels, proximity to supply centers as well as the efficiency of logistics networks across these cities. Moreover, engineering costs too vary in accordance with the region, the report added.

The report also mentions that although the prices of cement have nearly tripled in the past 16 years while the cost of structural steel has more than doubled between April 2005 and November 2017, the stability is just around the corner. The implementation of the GST has now reportedly stabilized the cost of raw materials and streamlined interstate and import tax, in turn giving the real estate industry a major boost.

Also, GST has enabled builders to source materials from only registered suppliers in a transparent manner. Overall, the report finds that the GST seems to have managed to scale down the overall construction costs to a certain extent.

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