Building a Strong Foundation: The Significance of Learning Construction Cost Calculation

If you’re a student or an aspirant who wants to get into real estate, this article is for you! Construction cost is a very important part of a real estate project and accurately determining construction costs is of paramount importance.

A recent experience I had while reviewing student presentations shed light on the prevalence of myths and misconceptions in this crucial area. In this LinkedIn article, we will delve into the intricacies of construction cost estimation and the need for a standardized methodology right from the project’s inception.

The Common Misconception:

The heart of the issue lies in the widespread myths regarding construction costs. Students presenting their projects often cited basic construction costs ranging from ₹1400-₹1500 per square foot for a 14-storey building. While these numbers might seem attractive, they often overlook essential details, such as the consideration of super built-up area versus built-up area, the inclusion or exclusion of ceiling costs, and differences in pricing for government entities.

The Variability in Approaches:

One critical aspect highlighted in the student presentations was the diverse approaches to calculating construction costs. Some included ceiling costs, assuming that contractors would do the same. Others neglected ceiling costs, as they might be the case when submitting tenders. This variability underscores the importance of a standardized methodology, especially when dealing with government projects, where cost structures and methodologies can differ significantly.

The Cost Evaluation Challenge:

The cost evaluation challenge faced by many projects is the risk of post-construction surprises. When construction costs are underestimated or miscalculated, a project can end up incurring significant losses or even face mid-way halts. To avoid this, the standard process is to complete the project’s design and then solicit tenders. However, this process can be flawed without a reliable methodology in place from day one.

The Need for Standardization:

To ensure project success and mitigate the risk of unexpected costs, a robust methodology must be established at the project’s outset. This methodology should encompass detailed guidelines for construction cost estimation, accounting for factors like super built-up area, ceiling costs, and government-specific requirements. By doing so, teams can confidently cross-check their calculations throughout the project’s lifecycle, eliminating errors that could jeopardize the project’s completion.

Conclusion:

Accurately ascertaining construction costs is a fundamental step in any construction project’s success. By implementing a reliable methodology from the project’s inception, we can pave the way for smoother construction processes, fewer financial surprises, and, ultimately, the successful completion of projects.

The construction industry is evolving, and so must our approach to cost estimation. It’s time to leave behind the myths and misconceptions and embrace a methodical approach that can stand the test of time.