Introduction
Building a home is a major investment that requires careful planning and budgeting. For real estate developers and investors looking to undertake a residential construction project in Chennai, understanding the typical costs involved is essential for evaluating the viability and potential returns of the investment in an apartment. This article provides an overview of the various factors that influence construction expenses and estimates the overall costs of building an apartment building in Chennai.
Factors Influencing Construction Costs
Several location-specific and project-related factors play a role in determining the total outlay for building an apartment complex in Chennai. These include:
Location and Land Prices
Land costs account for a significant portion of the overall budget for any residential construction project. Prices vary widely depending on the location within Chennai – prime areas close to the city centre command higher rates compared to suburban or peripheral localities. On average, developers can expect to pay Rs. 5,000-8,000 per square foot for land in desirable inner city neighbourhoods, while rates fall to Rs. 3,000-5,000 per square foot in the suburbs. The size of the plot also impacts land acquisition costs. A bigger land parcel allows for the construction of more apartment units and maximises returns on the investment in apartments.
Construction Materials
Material selection influences building expenses. Opting for premium construction materials like imported tiles, Italian marble, wood, or aluminium raises costs. On the other hand, using locally sourced materials leads to savings. Cement, steel, bricks, and other raw materials also see price fluctuations depending on market conditions. Overall, material expenses account for around 30-40% of the total construction budget.
Labour Costs
Availability and wages of skilled and unskilled labour are another key cost driver. Chennai has a large pool of construction workers but their pay rates have risen steadily over the years in line with inflation. Labour charges vary based on the complexity of the project – simple designs requiring basic finishing can be executed at Rs. 800-1,000 per square foot, while highly customised buildings may cost Rs. 1,200-1,500 per square foot for labour alone.
Design and Architecture
Elaborate architectural plans and specifications prepared by renowned designers or architects inevitably push up construction expenses. Simple and practical designs that minimise complexity during execution help contain costs and boost returns on investment in an apartment. Obtaining NOC and other statutory approvals from government bodies also levies additional compliance charges.
Regulatory Costs and Permits
Developers must factor in various regulatory, and statutory fees, and taxes applicable in Chennai when drawing up project budgets. This includes costs for obtaining construction permits, impact assessment clearances, licence fees, property registration, and other miscellaneous levies amounting to 5-7% of the total project cost. Receiving all necessary approvals upfront is crucial to avoid delays during the construction phase.
Cost Breakdown of Building an Apartment
Based on current market rates, here is an indicative itemised cost breakdown for building a standard mid-segment apartment complex in Chennai:
Land Acquisition Costs
For a 1000 sq yard plot in a residential area, land costs are approximately Rs. 4-5 crore.
Construction Costs per Square Foot
With RCC framed structure, basic finishes and facilities, construction expenses work out to Rs. 1,200-1,400 per sq ft. For a 50,000 sq ft apartment building, this amounts to Rs. 60-70 crore.
Additional Costs (Utilities, Landscaping, etc.)
Internal and external electrification, plumbing, and firefighting arrangements add Rs. 15-20 crore. Expenses for landscaping, compound wall and other development works are approximately Rs. 5-7 crore.
Estimating Overall Project Costs
Therefore, the total project cost for developing a 50,000 sq ft apartment complex with 24 units on a 1000 sq yard site comes to around Rs. 90-100 crore. This works out to a budget of Rs. 2,000-2,200 per square foot when financing costs are also considered. The investment in an apartment yields profitable returns if priced and sold appropriately in the local real estate market.
Financing Options for Construction
Major construction projects require lining up funding from multiple sources to cover such heavy capital expenditures. Developers can explore debt financing through housing finance companies and banks, which offer construction loans at competitive interest rates of 10-12%. Funds from private equity investors seeking high returns can also be considered. Part of the costs may be met through internal accruals and customer advances if apartments are pre-launched and pre-sold during construction. Careful financial planning is necessary to ensure timely completion of the project within budgeted costs.
Return on Investment (ROI) Considerations
If the constructed units are sold at Rs. 4,000-5,000 per sq ft, which is realistic for the location, developers can expect returns of 15-20% on their investment in the apartment over a 2-3 year holding period depending on speed of sales and receipt of payments. Fully leased and operated apartment complexes provide longer term rental yields of 4-6% annually through steady maintenance collections. Factoring in potential capital appreciation, well planned residential ventures in Chennai’s real estate market offer attractive risk-adjusted returns for investors.
Invest in the SPR City – Perambur
One promising location for future investment in apartments within Chennai city limits is Perambur, which is fast emerging as a new commercial and residential hub with the State Government’s Smart Cities Mission and SPR City Township Project. Strategically located just 6 km from the airport and 8 km from the city centre, Perambur offers affordable land rates, excellent infrastructure development, and proximity to key employment zones. The large-scale integrated SPR City project, spread over 250 acres, will have world class amenities and amenities when fully completed. It presents a golden opportunity for real estate investors to capitalise on the upcoming location appreciation over the next 5-10 years.
Conclusion
Building an apartment building requires careful planning and budgeting due to the major investments involved. This article provided an overview of the key cost factors and estimated total expenses to be around Rs. 90-100 crore for developing a standard mid-segment apartment complex. The SPR City township project in Perambur offers an excellent opportunity for investment in apartments, with world-class amenities and infrastructure being developed. Given the location’s proximity to the airport and city, as well as affordable land rates, investing in apartments in SPR City can yield good returns for real estate investors and is poised for future capital appreciation.
FAQs
1. How much does it cost to build an apartment in Tamil Nadu?
The average cost of construction per sq ft in Chennai is around Rs. 1500-2500. The estimated cost of building a 3000 sq ft apartment in Tamil Nadu would be around Rs. 45-90 lakhs depending on the location and quality of construction materials used.
2. What is the cost of construction per sq ft in Chennai?
To build a basic 3000 sq ft apartment in Chennai with average quality materials, one would need a minimum budget of Rs. 45-90 lakhs based on the current market rate of Rs. 1500-1800 per sqft.
3. How much money is needed to build an apartment?
The total money required to construct a new 3000 sqft apartment in Tamil Nadu fully depends on the location, quality of construction and finishes used. A rough estimate would be between Rs. 45-90 lakhs.
4. Can we build an apartment in 3,000 sq ft?
Yes, it is possible to build a 3000 sq ft apartment for a budget of Rs. 45-90 lakhs considering current construction costs in Tamil Nadu.
