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Construction Cost Analysis

Derived & compiled by

Mukesh M. Patel
Knowledge Worker, Neelkanth Group

June 2008
Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Costs as on date
(Residential)

A basic medium-end residential


group housing project would incur
construction cost of Rs.1250 psf.
Administrative & Office overheads
would be extra.

By providing a car park for every


1000 sq. ft. the construction cost
goes up by Rs. 180-250 psf. This
increases even more if a
basement car park is considered.
This is explained in the next slide.

The tabulated cost is on built-up


area which increases by 10% if
calculated on Saleable area.

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Major concern: Parking


costs
Efficient layout:
325 sq. ft. per car park
Cost per car park: Rs. 3.14 lacs

Efficient layout:
325 sq. ft. per car park
Cost per car park: Rs. 3.66 lacs

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Basic material rates as on


date
Cement
Steel
Strand
Sand
Metal
Kota
Granite
Glazing
Aluco Bond-

Rs. 249/- per bag


Rs. 48/- per kg.
Rs. 52/- per kg.
Rs. 600/- per m3
Rs. 600/- per m3
Rs. 25/- per sq. ft.
Rs. 130/- per sq. ft.
Rs. 120/- per sq. ft.
Rs. 120/- per sq. ft.

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Comparative statement of rates for 2005 & 2008

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Comparative Escalations (Residential): 2005-2008


All specifications remaining same, average annual increment has been 12.5%

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Sensitivity Analysis (Residential)


The cost of any Residential building is highly sensitive to the items/materials mentioned below:
For 10% increase in item cost, the corresponding impact on construction cost is shown.
Item
% increase in construction cost
Cement
2%
Steel
1.75
Sand
1.5 %
Tiling
0.5 %
Aluminum
0.5 %
Copper
0.75 %
Timber
0.25 %
Labour
2.0 %
Lifts
0.25 %
Plumbing fittings
0.25 %
TOTAL
IMPACT
9.75 %

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Escalation snowball effect

Escalation in Civil & structural costs have been to the tune of almost 12-14% annually

Escalation of overall construction cost for finished products in the residential segment
have been to the tune of 12% annually.

Average inflation rate in this same period of last 4 years has been 6-7% (this year it is
supposed to have crossed 10% already!)

Hence, in the last three years alone the construction costs in civil and structural areas
have gone up a clear 50%!

To top it all, the compensation revisions in the entire cross section of staff /
professionals retentions has also gone up by 200%. This has increased the
overheads from 5% 3 years ago to 12% as on date!!

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Finance costs & Taxes


Finance angle:
Cost of finance plays a major role in costing depending on the type of construction.
The turnover time of the project also becomes a very important factor while
considering the finance cost.
VAT & Service Tax:
The tax structure & its implications for each job work ought to be evaluated before
finalizing the contracts.
Though VAT was introduced to reduce double taxation, with the complex nature of the
construction business & various elements used in the final product, the objective is
not being realized. Also, VAT on Sales Agreement value is not clear still.

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Conclusion

Costs have gone up by 50% in the last 3 years.

With supply of contractors not matching the excess in demand, decent


contractors today are demanding a minimum of 30% margins thereby
further increasing the construction costs.

We need to be ready for this trend to continue at least in the near horizon.

With the model now shifting from Sell & Build to Build & Sell, finance
costs shall also have to be borne for a longer span of time.

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

Thank You

Corporate Office:- 5th Floor, Fine House, Anandji Lane, M.G.Road, Ghatkopar (East), Mumbai 400077.
Phone:- +91 22 25092010 Fax:- +91 22 25150930 E Mail:- info@neelkanthgroup.com

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