8NOVEMBER, 2024According to Colliers, the residential construction sector has seen the most significant cost escalation, with developers focusing on higher built quality and more amenity-rich gated communities to meet growing demand, further raising construction expenses. Labor costs have been the primary factor, with a 25 percent increase in labor expenses contributing significantly to higher construction budgets. Labor now accounts for more than 25 percent of the overall construction cost.In the past year, construction costs have increased by approximately 11 percent, primarily driven by a substantial rise in labor expenses and a modest increase in construction material prices. The increased need for skilled labor and the associated costs for training, safety, and regulatory compliance have further driven up these costs.However, the report highlights that the rise in prices for essential construction materials, such as cement, steel, copper, and aluminum, has been more subdued. Notably, cement prices have fallen by 15 percent, while steel prices have seen a slight decrease of 1 percent.Despite the overall increase in construction costs, the commercial and industrial & warehousing sectors have experienced strong growth in new supply.For example, the Indian office market saw 37 million square feet of new completions in the first nine months of 2024, while the industrial & warehousing sector added 22 million square feet. Developers are increasingly adopting technology and sustainability practices across various asset classes to manage the rising costs while ensuring timely project completions. Many consumers are now opting for quick deliveries, with a reported 46 percent reduction in purchases from traditional kirana shops. This shift is putting pressure on e-commerce majors to match delivery speeds and price points and has triggered a price war in the home delivery space. Quick-commerce companies have successfully reduced the pricing premium they previously charged for instant deliveries, now offering competitive prices to attract customers.The quick-commerce sector, expected to reach a market size of $40 billion by 2030 (up from $6.1 billion in 2024), is starting to encroach on traditional e-commerce platforms like Amazon and Flipkart. While e-commerce has typically been preferred for planned purchases, quick-commerce platforms are rapidly diversifying and are now targeting items traditionally dominated by larger e-commerce firms. The shift in consumer preferences toward instant deliveries for groceries and other fast-moving goods is intensifying the competition between these sectors. Quick-commerce companies are also disrupting Kirana shops and modern retail by offering competitive pricing and faster delivery.The Swiggy IPO has been hailed as the most successful in its category in a decade, listing at a 5.6 percent premium to its issue price of Rs 390. It closed at Rs 455.95, a 17 percent increase over the IPO price, defying expectations of a weak debut, especially in a challenging market. With a market capitalization of Rs 1.02 lakh crore at the close, Swiggy's listing reflects the growing prominence of the quick commerce sector, an emerging business that is rapidly attracting investment. TOP STORIESRISING LABOR COSTS CURRENTLY DOMINATING 25 PERCENT OF CONSTRUCTION BUDGETSCONSUMER PREFERENCES GRAVITATING FROM E-COMMERCE TO QUICK COMMERCE
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