Apr 17 (BNP): India’s construction sector, valued at around $685 billion in 2025, is projected to grow to $1.2 trillion by 2034, expanding at a CAGR of 6.9 per cent, driven by sustained infrastructure investment and urban development, according to a report released on Friday.
The report by Savills India and Hotelivate said demand for office spaces remains strong, supported by the expansion of Global Capability Centres (GCCs) and growing preference for Grade-A, sustainable workspaces. It also noted that construction costs have risen by 6.4 per cent to 7.6 per cent due to higher mechanical, electrical, and plumbing expenses.
According to the report, retail and residential segments have seen the sharpest rise in construction costs, with increases ranging from 3.8 per cent to 13.9 per cent between 2023 and 2025.
It added that mall construction costs have surged the most due to complex designs, deeper basements, and higher technical requirements. In the residential segment, luxury housing recorded the highest cost increase, followed by mid-income and affordable housing projects.
The report observed that residential demand continues to remain strong, with a growing shift towards premium and quality-focused developments across urban centres.
It further highlighted that rising input costs, wage inflation, and volatility in key raw materials such as steel, cement, and crude oil are impacting project economics. Construction labour wages have increased significantly in recent years, adding to overall expenses.
In the hospitality sector, performance has improved with occupancy levels stabilising at around 67–68 per cent and average room rates crossing ₹9,000. The sector also continues to attract investor interest, with a strong project pipeline and new developments underway.
The report advised developers to focus on efficiency, cost control, and sustainable planning to maintain long-term value and competitiveness in the evolving market.
