The cost of industrial and warehousing construction is rising in India

Women carry firewood on iron beams on a canal next to the construction site of a metro station in Mumbai, India. Reuters

V Nagarajan

The economic downturn due to the Covid-19 pandemic over the past two years has had a significant impact on the construction sector in India, which is susceptible to economic disruptions.

The cascading effect has led to higher prices for key construction materials, including steel, fuel, cement, copper and labour, as well as supply issues, which all increase overall construction costs.

Savills India estimated construction cost variations for the manufacturing and warehousing sectors using real-time construction cost data and project budgets.

According to the Savills India survey, the absorption of industrial and warehousing space stood at 44 million square feet in 2021, including 35.1 million square feet from Tier I cities and 8.6 million square footage of Tier II and Tier III cities, driven by robust growth in the e-commerce and manufacturing sectors as well as growing demand in emerging Tier I and Tier II cities.

On the supply side, India saw a new supply of 45 million sq ft in 2021, of which 36 million sq ft came from Tier I cities and 8.9 million sq ft from Tier II cities and III.

Growing demand for warehousing space for manufacturing, e-commerce and organized retail is expected to drive warehousing demand in 2022.

The market is expected to see an uptake of over 40 million square feet (including Tier I, II and III cities) in 2022. On the supply side, Savills India expects over 45 million square feet in during the same period.

Tier II and Tier III cities such as Rajpura, Lucknow, Coimbatore, Jaipur, Guwahati, Bhubaneswar, Nagpur, Kochi/Ernakulam, Indore, Hosur and Patna are expected to see supply of over 12 million square feet in 2022.

The prices of the materials most commonly used in construction were estimated in the cities to arrive at the overall cost. These materials include cement, steel, crude oil, copper, glass, wood, and other necessary materials, as well as labor wages.

The size of the global construction market reached $12.63 trillion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 7.4% according to EMERGEN Research, driven by rapid technological advancements and environmentally friendly buildings low carbon footprint environment.

Over the past two years, construction costs have increased due to rising prices for materials such as crude oil, steel, aluminum cement, and the cost of plumbing and fixtures. Covid-19 has caused a significant change in construction costs, leading to slightly higher material costs and supply chain disruptions.

According to market research firm “Research and Markets”, India’s construction industry is expected to grow at a CAGR of 9.5% between 2022 and 2026.

This is expected to be driven by increased government attention and spending on large-scale infrastructure projects, as well as growing demand for industrial and warehousing facilities, including data centers, and the recovery of residential and office demand. In 2020-2021, the contribution of the construction sector to GDP was 7.6%.

Meanwhile, technology can bring sweeping changes to the construction industry. Over the past two years, developers have been more open to integrating technology at various stages of construction.

Developers have started using tools such as drones, robotics, building information modeling (BIM), 3D printing and virtual reality (VR) to improve quality, reduce construction time and increase the efficiency of construction technologies.

I sold my property and deposited in the capital gains account scheme. Is the interest received on the deposited amount taxable? Premkumar, Sharjah.

Yes. Interest earned on the capital gains account is taxable under “Income from other sources”. Interest earned on the capital gains account is taxable in the year it accrues and is credited to the assessee’s capital gains account.

I inherited an ancestral property in India. Can I give it to my loved one? Are there any restrictions? Please clarify. Shailender Singh, Dubai.

If it is an ancestral property, the heirs obtain the right by birth, according to the religion to which they belong in India. Ownership can be transferred by reorganization, by family settlement or by division in the case of a HUF (Hindu Undivided Family). If you wish to donate your share of ancestral property, you can do so without any restrictions as it is like your self-managed property.

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