Savills India, in collaboration with hospitality consulting firm Hotelivate, has released its latest study titled “Building Smarter: Construction Cost Insights 2025”, presenting a sector-wide analysis of India’s evolving construction cost landscape across hospitality, residential, retail, office, and industrial & logistics real estate segments.
As per data by IMARC group, India’s construction market, currently valued at USD 685 billion in 2025, is projected to grow to USD 1.2 trillion by 2034 at a CAGR of 6.9%. This growth is primarily driven by sustained infrastructure investments, urban development, and expansion across office, residential, manufacturing, and logistics sectors. The report comes shortly after the recent announcement of Savills acquiring a majority interest in Hotelivate, bringing together the latter’s deep hospitality expertise with Savills’ global platform to create a scaled, institutional-grade advisory offering under the unified brand, Hotelivate-Savills.
Arvind Nandan, Managing Director, Research & Consulting, Savills India said: “India’s real estate sector continues to demonstrate resilience, supported by evolving investor expectations and sustained demand for high-quality, future-ready assets across segments. As development activity accelerates across office, residential, retail and industrial & logistics sectors, construction cost dynamics are becoming increasingly strategic. Input volatility and execution challenges are prompting developers to prioritise efficiency, sustainability, and robust planning as key differentiators in driving long-term value.”
Megha Tuli from Hotelivate-Savills, said: “India’s hospitality sector continues to see strong operating performance, but development economics are becoming increasingly complex, making cost discipline critical to project viability. Through our collaboration with Savills, this report offers a cross-sector view of construction costs, highlighting that fit-outs, financing, and early design decisions are now key levers driving returns.”
Highlighting some key points from the report:
Cost Escalation Trends: Retail and residential segments lead the sharpest rise in construction costs
• Construction costs increased between 3.8% and 13.9% across sectors (2023–2025)
• Malls saw the highest rise at 13.9%, driven by façade complexity, deeper basements, and higher MEP costs
• Luxury residential increased 12.8%, followed by mid-segment (11.9%) and affordable housing (11.1%)
• Office (7.0%), hospitality (6.5%), and warehousing (5.8%) recorded moderate increases
• General manufacturing remained lowest at 3.8%, indicating relatively stable costs
Growth Drivers: Structural shifts are reshaping demand across real estate segments
• Growth is being driven by GCC expansion, manufacturing momentum, and e-commerce-led demand for warehousing and logistics
• Residential demand remains resilient, with a clear shift towards premium, quality-led developments across urban markets
• Organised retail is evolving, with developers investing in experiential formats, design upgrades, and destination-led assets
• Occupier preferences are shifting towards Grade-A, sustainable, and tech-enabled spaces, especially in office and mixed-use developments
Input Costs & Labour Pressures: Volatility and wage inflation continue to impact project economics
• Fluctuations in steel, cement, and crude oil prices remain key cost drivers
• Construction labour wages have risen ~23% (2020–2024), significantly increasing overall costs
• Logistics and energy costs remain elevated, driven by global geopolitical factors and supply chain disruptions
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Sectoral Insights: Office, Residential, Industrial, and Hospitality Trends
• Office Sector: Demand remains robust, driven by GCC expansion and occupier preference for Grade-A, sustainable workspaces. Construction costs rose by 6.4%–7.6%, largely due to a sharp increase in MEP costs.
• Residential Sector: Continued demand, particularly in premium and mid-segments, is driving cost escalation and quality-led development
• Industrial & Logistics: Strong growth driven by e-commerce, manufacturing, and supply chain modernisation, with relatively stable cost increases.
• Hospitality Sector: Performance continues to improve, with occupancy stabilising at 67–68% and average room rates crossing INR 9,000. Investor confidence remains strong, with the pipeline exceeding 120,000 keys and 50,000 keys signed in 2025. Development costs are rising, averaging INR 1.36 crore per key (INR 11,300 per sq. ft.). Leisure hotels cost only ~14% less per key than urban hotels despite being ~36% smaller (91 vs 135 keys), reflecting higher infrastructure spends. Tier-III hotels offer a significant cost advantage, with ~33% lower per-key costs (INR 1.04 crore vs INR 1.55 crore) and ~32% lower per sq. ft. costs despite ~20% higher space per key.
Outlook: Efficiency, planning, and sustainability will define the next growth cycle
• Developers must balance cost efficiency with quality and sustainability
• Early-stage planning, design optimisation, and capital allocation will be critical to project viability
• The next phase of growth will be driven by efficient, future-ready, and well-planned developments, not just scale