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Indian Construction Costs - A Biannual Review - July 2020

1July 2020

Indian Construction Costs

A Biannual ReviewJuly 2020


2July 2020

The construction industry in India had benefitted from sustained growth in 2018 and 2019. Growth forecasts were equally good for 2020 and beyond, however, the onset and spread of the Covid-19, declared as a pandemic in January 2020, has forced all industries to rebalance themselves to remain commercially viable in the new evolving world. It is, however, important to reflect on what the industry looked like and analyse the way forward in the given situation. Distorted material supply, the reorganising of supply chains and the migrant labour exodus who will eventually return to construction sites post-monsoon / festive seasons have an impact on costs of construction as we know it. Newer technologies such as virtual construction, virtual reality, IoT sensors, prefabrication, touch-free controls are expected to take major strides in the near future.

To cast more light on the industry trends, I am delighted to introduce a new biannual publication of Gleeds India which provides real estate professionals a catalogue for mapping Indian construction costs. This publication walks the reader through the overview of the Indian economy, insights on pre-Covid-19 material and labour cost trends and Gleeds’ insights on the various construction sectors’ cost outlook. There is also a reflection on the current market trends of the sectors and where they are likely to be post the Covid-19 situation.

Whilst the change as a consequence of the pandemic is global, the ‘constant’ change for Gleeds India has been the zeal to upskill our knowledge base and assist in upscaling the industry. The full impact of Covid-19 on projects, design and cost are yet to be fully established. However, Gleeds India will be closely monitoring its effect on all aspects of the construction cost, time and process in the months to come which would allow our clients to make informed decisions.

I sincerely hope that this publication will be insightful and adds value to your outlook of the industry in the present times.

Ben Huskisson, MRICS.Managing Director

Note from the Managing Director


3July 2020

CoNTeNTS

04 Economic OutlookH1 2020 Construction Costs: Sector wise

Key Price Trends City Cost Indices

Material Prices Industry Transformation

Labour Rate Trends Look Ahead

Construction Sector Outlook

References

20

08 24

11 26

13 28

16 30


4July 2020

Economic Outlook

The Den Hotel, Bangalore


5July 2020

The Indian economy no different to the global economy has been in a turmoil as a consequence of the Covid-19 outbreak, declared by the WHo on the 30th of January 2020 as a global emergency. Like other countries, India’s economy also depends on the control of the pandemic spread.

As a result of the pandemic, uncertainty clouds forecasts, however, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis as reported by the International Monetary Fund.

In India, there are various constraints faced by businesses today. The lockdown and the complete close of business for a month, for some cities even more, the drop in demand, disruption in the supply chain, a credit crunch, non-availability of access to raw materials and movement

of labour has influenced the anticipation of return of normalcy to only be in Q1 2021.

The IMF in mid-April predicted that the growth rate is likely to bounce back to 7.4% in 2021, if the virus is contained. This is quite positive as India is one of the few economies that show expansion despite the pandemic avalanche.

The employment rate estimates by Centre for Monitoring Indian economy (CMIe) show that unemployment shot up to 24% for the week ending on the 17th of May 2020 which then rapidly fell to an average 11.1% in the last week of June 2020, following the ease of lockdown regulations.

India’s economy is on its path to recovery, with small and medium scale businesses, construction sites, travel and restaurants all slowly recommencing.

Summary of the Indian Economic Outlook

Taj Vivanta - Yeshwantpur, Bangalore


6July 2020

The lockdown implemented from the end of March into May 2020, weighed the Indian economy down. The Government has tried to ease out on small businesses with the aim to lighten the weight on the economy, however the adverse effect of the lockdown is yet unknown.

GDP in the year 2019 was 4.2% and in the given circumstances dropping as per the predictions of global economists demonstrated in the graph below.

The rate of unemployment had increased to 23.48% in May 2020 as reported by the Centre for Monitoring Indian economy. This reduced over June once there was an ease in the lockdown regulations, falling to 17.2% in the first week of June and then 11.1% end of June 2020.

The job market does look grim this year. The corporates are not sure what the future holds and are rationalising their sector. There is a reported optimism that job seekers may find relief towards the end of this year, with medium and small size enterprises hiring. There also may be better opportunities in the

The inflation rates in India have once again fluctuated with the Covid-19 crisis. It averaged 5.98 percent from 2012 until 2019, reaching an all-time high of 12.17 percent in November of 2013 and a record low of 1.54 percent in June of 2017. The growth was estimated to be steady from 2020 as noted below, until the outbreak, the projected rate of inflation for the year 2020 is estimated to be 3.34%:

H1 2020 Economic Overview

Source: Statista

Note: As per the source, year 2020 and 2021 are estimates.

Source: CMIE Reported as on 28th June 2020.1.90%

1.00%

4%

0.80%

4.20%

0.20% -0.40%

IMF World Bank ADB Fitch SBI Moody's UBS

GDP Projections Y2020

0%

5%

10%

15%

20%

25%

30%

6.93

9.027.6

6.06

7.22

Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Unemployment Rate

Rural Unemplyment Rate Urban Unemployment Rate India

9.7

7.34

7.768.65

8.44

8.759.41

22.89

23.5224.95

10.56

11.1312.3822.48

23.4825.79

0%

2%

4%

6%

8%

10%

12%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Inflation rate year on year

-4

-2

0

2

4

6

8

10

12

2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020Provsional

Inflation in % WPI and CPI

WPI (in %) CPI (in %)

Gross Domestic Product (GDP)

Unemployment

Inflation

logistics, facility management, finance, insurance, and manufacturing sector given the increase in demand following the CoVID-19.

Informal labour, however, are seen to commence work immediately post the lift in regulations, being mostly daily wage workers.

1.90%

1.00%

4%

0.80%

4.20%

0.20% -0.40%

IMF World Bank ADB Fitch SBI Moody's UBS

GDP Projections Y2020

0%

5%

10%

15%

20%

25%

30%

6.93

9.027.6

6.06

7.22

Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Unemployment Rate

Rural Unemplyment Rate Urban Unemployment Rate India

9.7

7.34

7.768.65

8.44

8.759.41

22.89

23.5224.95

10.56

11.1312.3822.48

23.4825.79


7July 2020

WPI and CPI

Both wholesale price index (WPI) and the consumer price index (CPI) are the change in the price of various goods or services in the economy, where the wholesale price index measures the percentage change in the price in wholesale index, while consumer price index measures the percentage change in the price in retail market and hence it is more useful for consumers rather than businessman.

The graph demonstrates the inflation for wholesale price index and consumer price index as noted by the Indian Government. Also noted, the 2019-2020 is provisional.

The graph is a trends graphs USD to INR, averaged. The Rupee in April 2020 showed an all-time low of about 77 a Dollar, and was predicted to reach a high of 80 end of June 2020, however, it closed at 75.53 a dollar on the 30th of June 2020, to average to about 74.12 a Dollar for the first half of the year.

0%

2%

4%

6%

8%

10%

12%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Inflation rate year on year

-4

-2

0

2

4

6

8

10

12

2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020Provsional

Inflation in % WPI and CPI

WPI (in %) CPI (in %)

USD to INR

Source: XE Currency Charts as on the 29th of June 2020.

Y2014 Y2015 Y2016 Y2017 Y2018 Y2019 Y2020

61

64.1267.17

65.1

68.470.39

74.12

40

45

50

55

60

65

70

75

80

US

D to

INR

$

Source: India Budget Economic Survey Report, The Government of India, Ministry of Finance

Marks & Spencer

Average USD to INR


8July 2020

Key Price Trends

Nokia


9July 2020

Steel Prices in Major Cities:

The price trends for the most used material in the industry are set to change as a result of the effect of the Covid-19 pandemic. Prior to March 2020 of commonly used construction material price trends are demonstrated below:

As reported by the economic Times, cement and steel sector output declined by 86% and 83% respectively in April 2020.

Sources: Sail. Note: All year prices are averaged and in INR, and Sail have last updated rates in June 2020. All prices include GST.

Source: My petrol price. Average price per year considered. For the year 2020 average price up until the 29th of June considered.

Key Price Trends

Diesel Prices In Major Cities:

49,425 42,025 38,400 45,375 56,650 49,753 53,312

50,000 40,375 40,700 44,875

55,825 50,230 53,799

49,475 41,200 39,500

45,250 56,950

49,700 52,700

50,875

43,275 38,400 45,375

56,650 49,553 50,445

49,475

40,975 39,425 45,750

57,525

49,375 52,200

49,475

41,000 39,500

45,200

56,850

49,025 51,595

-

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

3,50,000

4,00,000

2014 2015 2016 2017 2018 2019 2020

AVERAGE STEEL PRICE IN INR / YEAR

63.71 54.56 59.02 59.92 70.64 69.63 69.10

55.56 47.79 53.24 57.12 66.57 66.44 68.66

59.2450.01 54.55 59.23

70.38 70.13 69.3262.74

53.6457.24 59.51

69.87 68.50 68.3860.22

51.5555.35 57.38

68.04 68.58 68.2160.53

53.1257.84 61.86

73.18 72.32 72.05

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

2014 2015 2016 2017 2018 2019 2020

AVERAGE PRICE IN INR / YEAR

Mumbai (Rs./Ltr) Delhi (Rs./Ltr) Chennai (Rs./Ltr)

Pune (Rs./Ltr) Banglore (Rs./Ltr) Hyderabad (Rs./Ltr)


10July 2020

Aluminium and Copper:

Crude Oil:

Source: Country economy data

Price Trend Indices for Cement:

Source: Gleeds Internal Data (Mumbai). Prices are in INR and exclude GST. Note: Price does not account for the impact of the Covid-19.

2052015

224

231

247

225

255

2016 2017 2018 2019

210

215

220

225

230

235

240

245

250

260

255

Average Rate excl Tax

Crude oil (USD/Barrel)

Source: London metal exchange Prices noted are in USD and are averaged for the year and for year 2020 averaged up until the 29th of June.

Aluminium (USD)/Tonne

Copper (USD)/Tonne

0

1000

1823.00 1630.50 1619.382050.00

1797.63 1492.37

5250.25

6054.136549.00

6209.255413.75

5010.38

6663.87

2022.13

Y 2014 Y 2015 Y 2016 Y 2017 Y 2018 Y 2019 Y 2020

2000

3000

4000

5000

6000

7000

93.67

50.39 49.5453.73

67.75

65.13

36.11

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Y 2014 Y 2015 Y 2016 Y 2017 Y 2018 Y 2019 Y 2020

CRUDE OIL (USD/BARREL)

The graph shows a price trend for cement prices in Mumbai. In 2019, even with the rise in demand, cement prices hiked and is said to have achieved it highest production level, with capacity utilisation of 78%.

The consumption of Aluminium and Copper is muted following the lockdown and the drop in demand and the full benefit of the drop in prices has been of no advantage for the industry.

Crude oil impacts inflation largely because of the manufacturing of raw materials depends on it. Though ideally construction materials like cement, paints, glass, plastics, PVC pipes and rubber prices move in tandem with the price of crude oil, other factors like, the present drop in demand, disruption of supply of other raw materials and labour shortage has negated the advantage of the price drop.

Additionally, transportation costs is impacted majorly by crude prices, however, with change in Government taxation, the benefit is not realized by the end-user.


11July 2020

Material Prices

The Den Hotel, Bangalore


12July 2020

Material prices in various cities:

Material Prices

Description UoM Mumbai Delhi Bengaluru Hyderabad Chennai Pune

Cement

Grade 43 INR/MT 6,800 6,800 5,840 6,800 6,400 6,000

Steel

Reinforcement INR/MT 42,000 43,000 40,750 43,200 42,500 40,000

Structural Steel INR/MT 48,000 48,000 48,000 46,000 47,000 46,560

Clear Glass

6mm INR /Sqft 68 68 82 66 70 68

8mm INR /Sqft 88 88 102 86 90 88

Stone

Granite INR/ Sqft 150-250 120-250 90-250 90-250 115-250 115-250

Marble INR/ Sqft 220-500 220-500 180-500 175-500 150-500 180-500

Makrana INR/ Sqft 250-1000 250-1000 250-1000 250-1000 250-1000 250-1000

Kota INR/ Sqft 40-50 30-40 40-50 40-50 40-50 30-40

Cuddappa INR/ Sqft 20-25 20-25 15-25 15-25 20-25 15-25

Wood

Salwood INR/ cuft 1,650 1,550 1,250 1,600 1,250 1,050

Plywood 12mm thick

INR/ sqft 67 63 70 63 61 64

Paints

emulsion INR/ 20 ltr 3,200 3,000 3,200 3,300 3,400 3,360

Electrical Wires- Copper

1.5 sq mm FRLS Cu wire

INR/mtr 15 14.5 14 14 14 13.5

2.5 sq mm FRLS Cu wire

INR/mtr 23 22.5 22 21.5 21.5 21.5

4 sq mm FRLS Cu wire

INR/mtr 33 32 31 31 30.5 30.5

Electrical Al cable

4Cx 2.5 Sqmm Al. Ar. Cable

INR/mtr 67 65.5 63.5 63 62 62

4Cx 4 Sqmm Al. Ar. Cable

INR/mtr 72 70.5 68.5 67.5 67 67

Electrical Cu Cables

4Cx 1.5 Sqmm Cu.. Ar. Cable

INR/mtr 85 83.5 81 80 79 79

4Cx 2.5 Sqmm Cu. Ar. Cable

INR/mtr 118 115.5 112 111 110 110

4Cx 4 Sqmm Cu. Ar. Cable

INR/mtr 160 157 152 150 149 149

Source: As per Gleeds’ database in the month of June 2020 unless noted otherwise. All prices exclude GST.

All prices are supply prices and a guidance only. Transportation, and any other abnormals are not included.


13July 2020

Labour Rate Trends


14July 2020

1. Mumbai:

3. Chennai

2. New Delhi:

4. Hyderabad:

Labour Rate Trends in Various Cities

Note: Costs do not account for the impact of Covid-19. Rates for 2020 are as on Feb 2020. Rates are in INR and are daily wage rates.

The beginning of the lockdown at the end of March 2020, saw a set of alarmed migrant labour, leave the cities to reach their homes in the hope of safety and security. When the rules we relaxed towards the end of May, most migrant labour left the cities back to the suburban small towns and villages. While, the labour will commence work

at the earliest as most are daily wage workers, it is also understood that the most labour, will have reservations on returning to Tier 1 cities following the failure to flatten the CoVID-19 curve. The return of labour full time to construction sites is only estimated post Diwali, anticipating no second wave of pandemic.

Source: Minimum Wage-India

Source: Chennai.nic.in



462

Year 2016

482

509

479

Year 2017

498

525

495

Year 2018514

541

544

Year 2019

564

591

544

Year 2020

564

591

Unskilled Semi-Skilled Skilled

Mumbai

291

338

375

313

364

403

327

380

421

327

380

421

350

406

450


Chennai

Year 2016Year 2017Year 2018Year 2019

Year 2020

368

407

448

534

588

648

534

588

648

571

629

692

569

626

689


NewDelhi


Year 2020

368

407

448

317

345

377

319

376

462

330

390

478

330

390

478


Hyderabad


Year 2020


15July 2020

Post Covid-19 following a survey that was conducted by Gleeds in the 2nd week of May 2020, it is noted that the labour rates were predicted to increase by more than 10%.

Migrant labour has been badly hurt in the present crisis. The complete lockdown on March 24th that came as a surprise to the entire nation, left the labour stuck in large cities with little or no means to fend for themselves. This brought about an exodus of labour on foot to their villages. Post the relaxations of lockdown measures late May, most labour found their way back home and have commenced the seasonal agricultural jobs, refusing to return for large work on construction sites in bigger

cities. Government aid including a three-month wage and supply of essentials like oil and rice, now announced till the end of November 2020, have prompted labour to stay on in their hometowns. In the current monsoon season, work progress is slow and the labour are perceived to only return post monsoon, after the Diwali festivities when the seasonal demand of the agricultural sector is over, the CoVID-19 crisis is curtailed or contained and the need to earn resurfaces.

5. Bengaluru: 6. Pune:

Source: Minimum Wage-India Source: Maharashtra Jeevan Pradhikaran

310

317

325

332

341

350

358

367

377

385

395

405

385

395

405


Bengaluru


Year 2020

325

346

424

385

372

456

414

443

488

493

512

539

493

512

539


Pune


Year 2020


16July 2020


Vivanta by Taj, Coromandel, Chennai


17July 2020

The construction industry was on an upward trend in 2019. All sectors were flourishing, especially the commercial and residential sector. India also jumped to the 63rd position in World Bank’s ‘ease of Doing Business 2020’ report, both reflecting and attracting the confidence of local and global entities.

There was a rise in IT companies across the country with companies basing themselves in prominent cities like Delhi, Mumbai, Bangalore, Hyderabad, Chennai and Pune. The demand for commercial buildings rose and the supply was less, which brought about a higher rental cost, which in turn brought about a good return in investment.

This sector was reported to have received $2.9 billion investment from private sectors in the year 2019. office assets were continuously growing, and investment was providing stable returns. There has also been a 40% growth in the sector for both leasing and pre-leasing.

Residential sector was also on the road to improvement, with the pickup of affordable and mid-range homes, while the premium and ultra-premium was left more to end user requirements. The Indian Government had created an alternative investment fund of INR 250 Billion for last-mile funding of 1,600 stalled housing projects. GST rates were slashed from 8% to 1% for affordable homes and 12% to 5% for regular units in March 2019 to make under construction projects more attractive. Housing prices however remained stagnant in the year and the growth rate was about 1%. However, it is understood that the IT hub cities like Mumbai, Hyderabad, Pune and Bangalore showcased a slightly higher growth rate in comparison to the other cities.


Commercial Sector

Residential Sector

Delayed decisions on occupancy and hesitation to rent or buy spaces brings this sector into an uncertain standstill with no new revenue generation. The productivity of ‘work from home’ or WFH has increased in the lockdown period and there is a sure possibility of reduction of the seat-based leases as a consequence of more staff availing the WFH option. offices are also now relooking into office space redesign or refurbishment to accommodate the social distancing and health and hygiene norms. There will be delays in the completion of office spaces due to revised operating procedures (design related such as upgrading HVAC and workspaces), disrupted supply chain and the unavailability of labour. Newer project propositions maybe withheld considering the present uncertainty. Firms are likely to opt for centralized operations and consolidate their space holdings to cut costs and optimize work operations.

Home loan collection has plummeted in March 2020, an effect of the pandemic. Residential bookings fell by about 78% as compared to January 2020. There have been 6.4lakh unsold units and 4.7 lakh units yet to be completed nationwide in the last quarter. The RBI has allowed a 3-month moratorium on term loans till May 2020, which was then further extended will August 2020, expecting to release some pressure off the developers as well as home loaners, however their cash outflows in the long run maybe negated due to the stalled projects. The housing demand is seen to decline as investors might shy away in locking their capital in physical assets in an unstable environment. With the overhanging job uncertainties following lay-offs and salary cuts home buyers may withhold till more promising times, posing a challenge to the housing sector. There also now is an interest towards township following a desire to live in a controlled environment. Tier II and Tier III cities may see a rise in the demand for housing long term following reverse migration and the reservation to move back into a crowded Tier I city.

Impact of Covid-19: Medium Impact



18July 2020

The market size of hotel industry in India (including unorganized market) is estimated at $22 Billion in 2019, growing at 8.6% till 2025. In the past few years, the year on year growth rate has been about 7%. The tourism market in India has picked up which had a direct bearing on the demand for the hotel, increasing the occupancy. There was a reported 70% to 80% occupancy in 2019, while only 60% is required to being in a good return of investment. Rapid urbanisation also saw the rise of tier 3 type hotels and many hotel managements companies have started setting up in smaller towns. The rise of the economical hotels has pumped in large revenues.

This sector seemed to have struggled in the past year 2019. The leasing activities reduced across the major cities and the level of vacancy fell slightly from the previous year. The retail industry however attracted private equity investments from around the world totalling to around 1billion US dollar, which seemed to be a promising market for the international retailers.

Hospitality Sector

Retail Sector

This sector which is heavily dependent on the trade, travel and tourism, has come to a sudden standstill post the global travel bans and prolonged lockdown in India. employees have been laid-off and the indefinite timeline for reopening has brought this sector to a standstill. The sector is seen to be now functioning at about 15% capacity, with occupancy consisting of people who are quarantined or medical personnel. The drop of revenue for the industry is expected to range from $4.2 to $4.7 billion with the most affected regions being Bengaluru, Mumbai, Delhi & Gurugram. The first to recover post the slight relaxations maybe the economy and mid-scale hotels, following the reopening of the manufacturing units in small towns and the agricultural sector. While this sector is adversely affected in other parts of the world, 80% of India’s revenue is generated from domestic travel which may pick up faster when the CoVID-19 curve is flattened.

According to a Retailers Association of India report, by end of February itself, the business had dropped by 20% to 25% and in March the business has reduced to only 15% of the average yearly business. ICRA estimates rental expenses form a sizeable share of 12% to 16% of revenues for retailers, therefore, all tenants are likely to negotiate for waiver or rebate of the rentals. Retailers Association of India states that India is staring at a scenario where 30% of the retail stores would shut down, leading to 1.8 million people losing their jobs. The spending capacity of customers has reduced in turn affecting the sector. Having said that, the essentials and pharmaceutical industry is adjusting to over demand and the practice of hoarding. Though malls and other large retail have reopened, there seems to be a big customer reservation against visiting public places despite the all health and hygiene precautions being in place.

Impact of Covid-19: High Impact

Impact of Covid-19: High Impact

The healthcare sector has been growing steadily in the past few years and has become one of India’s biggest sectors. The market was estimated to increase three-fold by the Indian Brand equity Foundation (IBeF), with a promising scope for the contribution to the country’s GDP, which is presently 1.15% of the total GDP.

Healthcare Sector

The healthcare system has also been impacted during the ongoing crisis. The unprecedented situation has challenged the sector to provide and support the unforeseen needs. The government sector has now been supported by the private sector to cater to the CoVID crisis. The sector is experiencing a deficit on the requirement of equipment, consumables and resources such as beds, ventilators and manpower and is still learning to cope with the rise in safety and hygiene requirements to prevent the contraction of the Virus. Along with this however, there is a significant drop in the outpatient and surgery requirements, more based of the psychology of possible patients. This trend is expected to continue for the next 6 months, in anticipation that a more permanent solution to the CoVID crisis is found.



19July 2020

Impact of Covid-19: Low impact

India in the past two years India has grown in the usage of data centres, following most of the IT sectors moving their infrastructure to cloud. Increased digitalization efforts of the Indian government and plans for smart cities is another driver. Data localization mandates driven by the government has also led to increased regional presence by the MNCs and big tech companies like Google, Apple, Amazon/AWS, Microsoft, Facebook, as well as e-commerce giants. It is also noticed that Mumbai has the highest use of data centres accounting for the nearly half of India’s usage. The financial sector also was looking at an increased demand in data storage following the RBI mandate on use of servers located in different parts of the country.

India’s Pharmaceutical sector is the largest producers of vaccines in the world and is a generic provider of drugs globally. It supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. The projection of the industry was at about 10-12 percent in the next five years leading the country to be amongst the top ten in world for medicine spending. The Government with the vision to make India the world leader in end to end production of pharmaceutical products, introduced the Pharma vision 2020, with the goal to systemise the process.

Data Centres

Pharmaceutical Sector

With the present work from home options the requirement for data storage has risen, replacing server- based systems. Data centres are also now a welcome and necessary option for most companies considering the amount of data generated as a result of WFH options being used. This overwhelming data pressurises a company’s in-house capabilities paving a path for the use of data centres. The pandemic, uncertainty, and isolation have made storage and dispersal of digital data pivotal in preventing the global economic system from collapsing. even before the outbreak, the global focus had already shifted to AI, cloud storage and IoT. Flexibility of usage and payment, such as pay as you go, allows for less initial investment from a company’s point of view and the is more economical with very little space constraints. The usage of data centres are more likely to rise now as most companies are relooking into their digital infrastructure and moving towards the use of data centres.

The active pharmaceutical ingredients also known as API’s are mostly sourced by India from China. Post CoVID-19, the supply of this has gone into an acute shortage. It would be prudent for the country to now look to source this APIs locally to bridge the gap between the supply and demand of the pharmaceuticals that it is set out to produce and export. The breakthrough may allow India to be the global option which will boost the industry significantly. The policy of ‘Pharma India 2020’ was aiming to make India the no 1 manufacturing industry for end to end pharmaceuticals manufacturing. The rise in sales is likely to bring up the demand for pharmaceutical manufacturing units.


This sector accounted for about 16.8% of India’s total GDP as per the Ministry of Statistics and Programme Implementation (MoSPI). Both domestic and International Investments in the Indian manufacturing unit have been on the rise. Government policies such as ‘Make in India’ and sector specific investments in various companies aim to make India a global hub. The introduction of GST evened out the tax complications and served as a big attraction for foreign investors.

Manufacturing Sector

It may be noted that these units though slowing down maybe the sector which will be running through and post Covid-19 crisis. There would be a demand for locally made and sourced materials allowing the sector to find a new path for growth. With China being the epicentre of the pandemic, it will be natural that the global market might look for other alternatives. India was already preparing to boost its manufacturing sector, and the policies and taxations have already been implemented to ease business, opening opportunities to global investors to consider India for its manufacturing base. Having a growing strength of working population, this sector has a potential to surge.

Impact of Covid-19: Low impact


20July 2020

H1 2020 Construction Costs: Sector Wise

Marks & Spencer


21July 2020

Sector Wise Costing:

* Classroom with basic indoor and outdoor facilities.**Learning rooms with required amenitiesNote: The costs noted in the above table do not reflect the impact of Covid-19 and is pre Covid-19 pricing.Source: Gleeds India Data-base

H1 2020 Construction Costs: Sector Wise

Building TypeAssumptions for

CostsBengaluru

₹ / SqftPune

₹ / SqftDelhi

₹ / Sqft

Residential

Affordable BUA: 3,00,000 sqft 1,950 to 2,300 1,900 to 2,200 2,290 to 2,715

Premium BUA: 6,00,000 sqft 2,460 to 3,305 2,460 to 3,305 3,200 to 3,600

Commercial Building

Commercial BUA: 10,00,000 sqft 2,350 to 2,800 2,700 to 3,000 2,950 to 3,400

Office Fit-out Note: Costs based on carpet area for office fit-outs only.

Basic CA: 15,000sqft 2,000 to 2,400 2,000 to 2,300 2,000 to 2,500

Standard CA: 30,000sqft 2,600 to 3,200 2,400 to 3,200 2,600 to 3,400

Premium CA: 50,000sqft 4,000 to 7,000 4,000 to 6,500 4,000 to 7,200

Retail

Malls with retail stores 2,415 to 2,800 2,375 to 2,750 2,400 to 2,950

Store fit-out costs on carpet area

Quick Service Restaurants CA: 2,500 sqft 2,750 to 3,200 2,700 to 3,150 2,900 to 3,300

Apparel stores CA:25,000 sqft 2,000 to 2,300 2,000 to 2,200 2,150 to 2,450

Discount sports store CA:25,000 sqft 1,250 to 1,800 1,200 to 1,750 1,500 to 1,900

Jewellery CA: 8,000 sqft 5,000 to 6,500 4,800 to 6,200 5,500 to 7,000

Hospitality

3 star Hotel 100 key 3,800 to 4,650 3,400 to 4,500 4,600 to 5,500



Healthcare

Hospitals 500 bed capacity 4,500 to 5,200 4,550 to 5,300 5,500 to 6,600

Education

School*500 Pupil, high school

2,600 to 3,300 2,300 to 2,850 4,250 to 4,800

University** Campus 5,100 to 5,800 4,700 to 5,500 5,500 to 6,350

Industrial

Pharmaceutical 3,300 to 4,200 2,970 to 3,800 3,500 to 4,300

Others

Multi-level Car park 850 to 1,200 800 to 1,050 1,050 to 1,300

Data Centres

Shell only Multi-tenant 4,200 to 6,200 4,200 to 6,000 4,400 to 6,350

Shell only Hyperscale 5,250 to 7,150 5,100 to 7,000 5,400 to 7,350

Fit-out (₹/MW) Multi-tenant 18,00,00,000 to 22,00,00,000

Fit-out (₹/MW) Hyperscale 16,00,00,000 to 20,00,00,000


22July 2020

*Classroom with basic indoor and outdoor facilities.

**Learning rooms with required amenities.

Note: The costs noted in the above table do not reflect the impact of Covid-19 and is pre Covid-19 pricing.

Source: Gleeds India Data-base.

Building TypeAssumptions for Costs

Mumbai ₹ / Sqft

Chennai ₹ / Sqft

Hyderabad ₹ / Sqft

Residential

Affordable BUA: 3,00,000 sqft 2,375 to 2,800 1,865 to 2,205 1,865 to 2,100

Premium BUA: 6,00,000 sqft 3,200 to 3,750 2,545 to 3,050 2,400 to 3,000

Commercial Building

Commercial BUA: 10,00,000 sqft 3,050 to 3,500 2,300 to 2,750 2,375 to 2,800

Office Note: Costs based on carpet area for office fit-outs only.

Basic CA: 15,000sqft 2,200 to 2,700 1,900 to 2,300 2,000 to 2,400

Standard CA: 30,000sqft 2,800 to 3,600 2,400 to 3,000 2,600 to 3,200

Premium CA: 50,000sqft 4,000 to 7,500 3,800 to 6,200 3,900 to 6,500

Retail

Malls 2,545 to 3,000 2,375 to 2,800 2,375 to 2,700

Store fit-out costs on carpet area

Quick Service Restaurants

BUA: 2,500 sqft 3,000 to 3,400 2,700 to 3,100 2,750 to 3,200

Apparel stores BUA: 25,000 sqft 2,200 to 2,500 1,900 to 2,250 2,000 to 2,300

Discount sports store BUA: 25,000 sqft 1,500 to 2,000 1,200 to 1,700 1,250 to 1,800

Jewellery BUA: 8,000 sqft 5,500 to 7,000 5,000 to 6,000 5,000 to 6,500

Hospitality

3-star Hotel 100 key 4,650 to 5,900 3,700 to 4,500 3,400 to 4,660



Healthcare

Hospitals 500 bed capacity 5,500 to 6,800 4,200 to 5,000 4,400 to 5,200

Education

School*500 Pupil, high school

4,650 to 5,000 2,500 to 3,250 2,550 to 3,650

University** Campus 5,950 to 6,500 4,650 to 5,500 4,650 to 5,550

Industrial

Pharmaceutical 4,000 to 5,500 3,100 to 4,000 3,250 to 4,100

Others

Multi-level Car park 1,200 to 1,350 800 to 1,100 850 to 1,200

Data Centres

Shell only Multi-tenant 4,650 to 5,750 4,100 to 4,900 4,250 to 5,100

Shell only Hyperscale 7,800 to 8,300 6,150 to 7,000 6,100 to 7,200

Fit-out (₹/MW) Multi-tenant 18,00,00,000 to 22,00,00,000

Fit-out (₹/MW) Hyperscale 16,00,00,000 to 20,00,00,000

Sector Wise Costing:


23July 2020

Data provided in this report is an average range of costs. There are many cost parameters that contribute to costs and some judgement is to be applied while using the

costs indicated. The following are the parameters that are to be considered:

Area definitions followed in this document.

All costs noted below is on the built-up area unless noted otherwise. This indicates the cost incurred on all the unusable areas, still contribute to costs.

Assumptions Made and Notes for reading the Costs

Built up area (BUA)

Plinth area shall mean the built-up covered measured at the floor level of the basement or of any storey

The built-up area includes the carpet area, plus the extra areas certified by the authorities, such as the area of the outer and inner walls, dry balcony area, etc.

Please note the following pertaining to the costs data provided. • Allcostsnotedareconstructioncostsonly.• AllcostsareinIndianNationalRupeesunlessnoted

otherwise.• Allcostsarepersquarefootunlessnotedotherwise.• Allcostdataisindicativeofcostsincurredatthetime

of the making of the report. • TheimpactofCovid-19isnotaccounted.Allcostsare

pre-Covid-19 unless noted otherwise.

All costs are deemed to include:• Allconstructioncostsincludingshellandcore,

architectural works, interiors and finishes, MeP and external development works unless noted otherwise.

• Contractor’spreliminaries• Contractor’soverheadsandprofits• Contingency• Inflation(tenderandconstructioninflation)

All costs are deemed to exclude:

• Siteabnormalsandanyspecificsiteconditions.• Client’scostforlandacquisition• Client’soverheads• Client’sprofitmargin• Pre-openingcosts• Consultants,designers,andotherprojectmanagement

fees• LandValue• ProjectInsurance• ForceMajeure• AnyadministrationcostsincurredbytheClient.• Anypreclearing,logisticcostsincurredbyClientbefore

site hand over to contractor. GST • GST.

Site conditionsProcurement route considered

Market conditions.

Location DesignAssumptions made on site abnormal

Building shape and size

Requirements of the end user

Time scale for completion

Contract typeQuality and safety systems required

Any site restrictions

As per IS 3861-2002 ReRA


24July 2020

City Cost Indices

Marks & Spencer


25July 2020

City Cost Indices

Gleeds carried out an extensive exercise to map the costs across the various Indian cities.

The following methodology was adopted to derive the indices.

• A basket of items comprising of the most commonlyused materials in construction, labour and consumables was established. These goods have been identified and known to demonstrate the inflation and dynamic nature of the goods typically used in the construction sector. Approximate individual quantities within the items were taken to represent standard type of commercial building.

Appropriate weightage was given to each of the items and based on weighted average method, a base Index was calculated.

•Decemberhasbeenconsideredasthebasemonthasthisis the best representation of costs before the uncertainty of the pandemic. The base city taken for calculation of Index is Bangalore.

• Cost movement for the different cities across similartimelines has been mapped and the indices were thus derived.

The graph below indicates the construction costs indices for the six major cities for four months starting December 2019, with Bengaluru as the base.

98

99

103

105

101 10

2

102

105

107

102 10

3 104

107

109

108

104

106

108

111

113

90.00

95.00

100.00

105.00

110.00

115.00

Bangalore Pune Chennai Hyderabad NCR Mumbai

Construction Cost Indices for Various Cities

Dec-19 Jan-20 Mar-20 May-20

100

103 10

5

98

Source: Gleeds’ Internal Database.


26July 2020

Industry Transformation

Godrej one, Mumbai


27July 2020

Industry Transformation

• ChangeinContractualterms-ForceMajeure• Changeincontractor’sprelims• Sitemanagement• Projectmanagement• HumanCentricDesign• Programme

• ReturntositesonlyinNovember(estimated)• Additionalprelimsforlabourcamp• Increaseindailywage

• ArtificialIntelligence• VirtualrealtyandAugmentedrealty• Dronetechnology• BIM• Automation• Parametricdesign

• Uselocallysourcedmaterials.• Preferlocalmanufacturers.• Preferredreadilyavailableproducts.• MechanizedConstruction.

• Reassessedproductivity.• Revisedprogrammetimelines.• Distortedsupplychain.

• Regulardisinfection• Regularcleaningandsanitisation• Moresanitisationstations

• Self-ownedpersonalprotectionequipment.• Lesscontactpoints• Infraredcamerasfortemperaturechecks• Sustainabledesigns

• De-densificationofoffices• Moreworkfromhomesoptions• Introductionofworkshifts• Staggeredbreaktimes

• Modularconstruction• Prefabrication• 3Dprintingforcommonlyusedcomponents

Safe workspaces

Clean workspaces

Social distancing

Project completion times will be revised based on

Supply chain rebalance

Move to technology

Evolution

Construction trends

Labour Crisis


28July 2020

Taj, Chennai

Look Ahead


29July 2020

The construction industry is a good contribution to the nations’ economy and the industry has commenced works, when the lockdown regulations were relaxed late May 2020. Sites works have resumed in some cities, with renewed standard operating procedures to create a safe work environment. While some cities are still shutdown, clients have commenced on the designing strategies and are occupied with readying design and other pre-contract works for future projects.

For the newer construction, set out to commence after the period of 6 months, based on a survey conducted by Gleeds’ in the second week of May 2020, it is predicted that cost of construction might increase by 5% to 7% provided the country is CoVID-19 free. However, with that, is also the increase of the Contractor’s prelims which is a consequence of the mandatory high health and safety requirements for site cleanliness and labour camps. This maybe slightly offset with the reduction in the contractor’s mark-up, which may be offered to ensure competitiveness and with the intent to survive in the market.

Material and labour are not only cost contributors but also the root of the construction activities. Supply chain disruptions and unavailability of labour may cripple the smooth flow of construction activities and giving rise to delays and losses. However, the industry now has time to look at retrieving it’s foothold from the sudden unforeseen downslide, by focussing on ‘working with the CoVID-19’ and rearranging itself to best suit the new requisites.

A look towards technology will also be a key to the world of construction which may include a drive towards use of machinery, new equipment and the adaptation of less popular forms of construction such as pre-engineered buildings/modular construction.

Moving into the future which includes co-existing with the CoVID-19, the industry is seen to be picking up the pieces and reconstructing itself to move forward into a better tomorrow.

Look Ahead

Taj, Chennai


30July 2020

• IBEF:AboutIndianGrowthrateandstatistics.[www.ibef.org]

• Statista:Indiainflationratefrom1984to2021[www.statista.com]

• GovernmentofIndia,MinistryofFinance:EconomicSurvey2019-2020[www.indiabudget.gov.in]

• GDPgrowthforecasts[www.adb.org][www.imf.org] and media reports

• Indianretailindustryanalysis[www.ibef.org]

• ManufacturingSectorinIndia[www.ibef.org]

• Indianrealestateindustry[www.ibef.org]

• HealthcareindustryinIndia[www.ibef.org]

• MonetaryPolicyReport.[www.rbi.org.in]

• Covid-19:Impactonrealestate,Credai-MCHI[www.mchi.net]

• Indiarealestate-AdifferentworldpostCovid-19,Anarock[api.anarock.com]

• Mediareports:EconomicTimes,NDTV,BusinessStandard,TheHinduBusinessLine,Moneycontrol,IndiatodayandZee business.

MRICS: Member of the Royal Institution of Chartered Surveyors.

USD: United States Dollar

INR: Indian National Rupee

GST: Goods and Services Tax

MeP: Mechanical, electrical and Plumbing

BUA: Built-up area

CA: Carpet area

Sqft: Square foot

Cuft: Cubic feet

Sqmm: Square millimetre

Ltr: Litre

Mtr: Linear metre

MT: Metric tonne

FRLS: Fire retard low smoke

Al: Aluminium

Cu: Copper

Ar: Armoured

MW: Mega Watt

References

Abbreviations


31July 2020

Our Services

A MULTIDISCIPLINARY APPROACH

Gleeds operates a partnering principle with clients and project teams, offering impartial advice across an extensive range of services to provide solutions for every stage of the

property life-cycle.

• Project Management – control and delivery of your projects • Cost Management – predictability and control of costs

•Health&Safety•ProjectMonitoring •Advisory–deliveringbespokeintegratedsolutions

• Gleeds Digital Services (GDS)

Bangalore (Head Office)

Mumbai

Pune

Delhi NCR

Chennai

Hyderabad

Education5.2 million sq.ft

Commercial88 million sq.ft

Mixed Use18.8 million sq.ft

Residential117 million sq.ft

Hospitality6397 Keys

Industrial4 million sq.ft

Retail24 million sq.ft

Leisure & faith Based9 million sq.ft

Healthcare3060+ Beds

Sector Presence

India

India Overview


32July 2020

BenHuskisson, MRICS

Managing Director Email: [email protected]

Register with Gleeds- our cloud based integrated registration database for design professionals, contractors, suppliers and product manufacturers, recently launched to allow us to reach out to you quicker for our upcoming project opportunities.

Click on https://tinyurl.com/gleedsregister or scan the QR code using your camera to complete the registration.

For queries regarding the registration, please write to us at [email protected]

For any further queries, please contact Gleeds India Insight and Analytics at [email protected] or:

Vishal Shah, MRICS

Director Email: [email protected]

Sushma Wilson, MRICS

Executive Cost Manager Email: [email protected]

AshishPimpalkhare, MRICS

Senior Associate Director Email: [email protected]

Legal Disclaimer: This paper was prepared by Gleeds India Consulting (I) Pvt. Ltd. and is for general information only. Neither Gleeds nor any of their partners, directors, employees or other persons acting on their behalf makes any warranty, express or implied and assumes any liability with respect to the information or methods contained in this paper to any person or party. This document is subject to copyright and must not be reproduced.

© July 2020 by Gleeds Consulting (I) Pvt. Ltd.

This issue was compiled by Gleeds India I&A with contributions from Siva Senathipathy, Jagjit Avdeel, Balaprakash B, Ravi K, PVSS Varma, Jagan Mohan k, Mallikarjun GS, Tushar Banerjee, Mayura Godse, Vimalraj B, Ramana Kumar, Bhagyshree Parikh, Kiran Pawar, Rahul V, Rajesh Babu, Bharat H, Padmini G and Srinivas S.

mailto:mailto:ben.huskisson%40gleeds.in?subject=

https://tinyurl.com/gleedsregister

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33July 2020

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