August 24, 2023: The TruBoard Real Estate Construction Cost Index shows that cost pressures on developers have eased. For the quarter ended June 2023, the index has contracted by 1.3% compared to a year ago.
As per the report, the biggest contraction in prices was seen in PVC products, plastics and metal products. However, the index remained flat compared to the preceding quarter. The index showed that construction costs have increased by an average of 5% in FY23 over FY22.
Sangram Baviskar, managing director, real estate practice, TruBoard Partners, said, “Our Real Estate Construction Cost Index shows that developers are in a comfortable position from a material and labour cost perspective. The fact that last quarter was one of the best in terms of sales with prices showing an upward trend giving the developers extra cushion. The product mix in residential real estate is moving towards larger size apartments, which may help in improving margins. Construction activity is expected to remain subdued in the coming months, owing to monsoons. That should keep material prices in check.”
Anuj Agarwal, chief economist and head of research at TruBoard Partners, said, “Inflation in commodity prices across the board has witnessed a softening. The hawkish stance of developed market central banks and the impact of past rate hikes will have a dampening impact on global growth. China’s post-Covid economic recovery has been weaker than expected. The dominant sentiment in the commodity markets remains that of weak demand. We don’t see a significant uptick in construction costs over the next three to six months.”
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