Building Smarter: Construction Cost Insights 2025
Savills India and Hotelivate have conducted extensive research to estimate construction costs for various asset classes across Indian cities. Hotelivate conducted a survey to gather insights on hotel construction costs from 597 hotels (80,321 rooms) across 150 cities, analysing variations based on asset positioning and across tiers between 2023 and 2025. In parallel, Savills India undertook a benchmarking exercise for construction costs across residential, retail, office, and industrial & logistics sectors, drawing on real-time data from awarded projects.
Summary of Variation in Average Construction Cost by Sector
The malls segment recorded the highest increase at 13.9%, driven by evolving facade designs, the addition of multiple basement levels, and an escalation in MEP and other associated costs. This was followed by the luxury residential segment (12.8%) and the mid-end residential segment (11.9%), indicating sustained cost escalation across upper and mid-housing categories. The affordable residential segment also witnessed a notable
increase of 11.1%, reflecting continued demand-led pressures, albeit at a relatively moderated pace compared to premium segments. In contrast, commercial office (7.0%), hospitality (6.5%), and Grade-A warehousing (5.8%) registered moderate increases, while general manufacturing (3.8%) reported the lowest growth, suggesting relatively stable construction cost conditions.
HOSPITALITY SECTOR
The Indian hotel industry had another strong year. Occupancy held steady at approximately 67-68% on a nationwide basis, while average room rates moved higher, growing by high single digits to low double digits across most markets, with national averages in the range of INR 9,000-9,100, up about 8-9% Y-o-Y. For a business that is inherently cyclical and one that has already seen over three years of strong performance, these are noteworthy results. Not all markets moved together. Certain markets such as Goa and Lucknow experienced some softening due to new supply entering the system. This is neither surprising nor concerning; periods of strong performance tend to attract capital, and supply, in time, has a way of balancing outcomes. External factors also played a role. Torrential monsoons disrupted connectivity across parts of Himachal Pradesh, Sikkim, and Uttarakhand, while geopolitical developments affected business across the country during May and June 2025, with similar disruptions being seen again. These events tend to influence short-term performance but rarely alter long-term direction. On the supply side, activity remains robust. More than 50,000 branded rooms were signed during 2025, and the development pipeline now exceeds 120,000 rooms, over half of the existing branded inventory. These are levels last seen more than a decade ago and reflect a simple reality: when returns are attractive, and demand appears durable, capital follows. Taken together, the picture is a familiar one. The industry is growing, supply is responding, and periodic imbalances will occur, but the underlying drivers remain intact. For a business built on long-term trends rather than short-term events, this is what matters most.
Construction Costs for Hotels by Positioning (per key): 2023 vs 2025
The overall average development cost (excluding land) stands at INR 1.36 crore per key, with the median at approximately INR 1.04 crore. The cost range from Budget to Luxury is 6.2x, broadly consistent with the 2023 survey’s 6.5x ratio, showing the relative structure of development economics has remained stable, even as absolute costs have risen. While perkey costs rise 6.2x from Budget to Luxury, the cost per square foot rises only 1.6x (INR 8,915 to INR 14,515). The difference in cost per room is mainly driven by space, as luxury hotels have about 3.2x more space per room than budget hotels (GFA of 1,679 sq. ft. vs 524 sq. ft.), along with higher fit-out costs and other costs.
For more information, please contact Megha Tuli at [email protected] or Mihir Chalishazar at [email protected]
