India's Construction Sector Forecasted to Achieve 6.9% Growth by 2034 Amid Rising Costs
Synopsis
India's construction market is on track for significant growth, expected to reach $1.2 trillion by 2034. This growth is attributed to ongoing infrastructure investments and urbanization, despite rising costs due to various factors. Explore the insights from the latest report on this evolving industry.
Key Takeaways
India's construction market is projected to grow to $1.2 trillion by 2034.
Growth driven by infrastructure investment and urban development.
Construction costs rose by 6.4% to 7.6% due to various factors.
Strong demand for premium residential and commercial spaces.
Hospitality sector shows signs of recovery with increasing occupancy rates.
New Delhi, April 17 (NationPress) India's construction industry, currently valued at $685 billion in 2025, is anticipated to reach $1.2 trillion by 2034, growing at a CAGR of 6.9%. This growth is fueled by persistent investments in infrastructure and urban development, according to a recent report.
Prepared by Savills India and Hotelivate, the report highlights a strong demand for office spaces, propelled by GCC expansion and a growing preference for Grade-A, eco-friendly work environments. The construction sector has seen costs escalate by 6.4% to 7.6%, primarily due to significant hikes in mechanical, electrical, and plumbing expenses.
Arvind Nandan, Managing Director of Research & Consulting at Savills India, remarked, “India's real estate market showcases remarkable resilience, driven by shifting investor expectations and a consistent demand for high-quality, future-ready assets across various sectors.”
To tackle input volatility and execution hurdles, developers are increasingly focusing on efficiency, sustainability, and meticulous planning as essential factors for driving long-term value, he noted.
The report also revealed that the retail and residential sectors are experiencing the most pronounced increases in construction costs, with rises ranging from 3.8% to 13.9% across different segments from 2023 to 2025.
Malls have witnessed the steepest cost increases, attributed to complex façades, deeper basements, and higher mechanical, electrical, and plumbing costs.
The luxury residential sector surged by 12.8%, followed closely by mid-segment housing at 11.9% and affordable housing at 11.1%.
Despite rising costs, residential demand remains strong, with a noticeable shift towards premium, quality-focused developments in urban areas, as the report indicated.
Additionally, it noted that price fluctuations in steel, cement, and crude oil are significant cost drivers, compounded by wage inflation, which has pushed construction labor costs up by approximately 23% from 2020 to 2024.
The hospitality sector is showing signs of recovery, with occupancy rates stabilizing between 67% and 68% and average room rates exceeding Rs 9,000.
Investor confidence remains robust, with a pipeline surpassing 1.2 lakh keys and 50,000 keys projected to be signed in 2025, the report emphasized.
It urged developers to strike a balance between cost-effectiveness, quality, and sustainability while emphasizing the need for early-stage planning, design optimization, and capital allocation.
Point of View
Highlighting both its potential for growth and the challenges it faces. As the sector adapts to rising costs and evolving demands, there is an opportunity for innovation and sustainability that could redefine urban landscapes.
NationPress
4 May 2026
Frequently Asked Questions
What is the projected value of India's construction market by 2034?
India's construction market is expected to reach $1.2 trillion by 2034.
What factors are driving growth in India's construction sector?
Sustained infrastructure investments and urban development are the primary drivers of growth.
How much have construction costs increased?
Construction costs have risen by 6.4% to 7.6%, primarily due to higher mechanical, electrical, and plumbing costs.
Which segments are seeing the highest increase in construction costs?
The retail and residential segments are experiencing the most significant increases in construction costs, ranging from 3.8% to 13.9%.
What is the current state of the hospitality sector in India?
The hospitality sector is recovering, with occupancy rates stabilizing at 67-68% and average room rates exceeding Rs 9,000.
