Important Factors that Influence Construction Cost

Published On: Feb 2, 2023

Constructing a house is not a walk in the park, as real estate is a costly venture. So, if you’re planning to build a house or a business project, it is important to get an estimate of the development cost. There are numerous factors affecting project cost which are sometimes aggravated by the complexities involved in the process. 

Factors Affecting Project Cost

This article enumerates the factors that influence construction cost, majorly influenced by externalities. 

1. Construction Material Cost

Shipping costs, raw material costs and taxes are some of the major factors affecting building costs. However, the cost of these elements depends on the project site. The size of the project in question also plays a vital role as a factor affecting construction cost. For instance, the bigger the size of the project, the more raw materials would be needed and vice versa. 

2. Construction Site

The site of the project is one of the leading factors affecting project cost. Site conditions like uneven land, poor soil, archaeological sites, poor soil, water bodies, the presence of pipes, and environmentally hazardous spaces can increase the project cost by many times. Thus, these factors would be covered in the cost of construction. 

3. Labour Wages

Labour wages are different across different States. Moreover, labour wages are also charged on an hourly basis, whereas in some places the wages are charged daily. Thus, it becomes important to know about the labour norms and then estimate the construction cost accordingly. 

Also Read: What does Mivan Shuttering Technology Mean in Construction

4. Project Quality

The quality of the project majorly influences the construction cost. Whether you are incorporating modern amenities or want to keep it basic, the project quality has a grave impact on the house's development cost. Moreover, the projects made with high quality also require the use of high-use raw materials. 

5. Insurance and Regulatory Requirements

The approval required from the regulatory authorities can be both time-consuming and costly. Keep in mind the home insurance cost while you consider all the costs as it could be a big blow to your budget at a later stage.

6. Project Size

A large project requires more material and a large workforce. Thus, the cost of construction would vary to a great extent based on the project size. For example, a 1,000 sq ft house will incur lower development costs in comparison to a 5,000 sq ft. house. 

7. Project Schedule

The expected time that a contractor takes to complete the project also gravely affects the house construction cost estimate. If there is an unpredicted delay in the project duration, then the construction costs might rise due to an increase in the indirect costs. 

8. Inflation

A construction project can be extended for years before it is completed. During the entire process, the cost of labour, equipment, tools, and materials can change according to inflated prices. These variations in the price should also be taken into account while the cost estimation process. 

Also Check: What does Setback Mean in Residential Buildings

9. Site Location

When the location of a construction project is away from the available resources, the project cost increases. The cost of tools, equipment, transportation for workmen, and materials increases with the distance which adds to the project cost. 

10. Site Slope

A sloping site can increase your construction costs considerably. The logistics and site access could be difficult to handle which also increases the safety concern. The structural solution has to be then curated, adding to the design factors that affect the cost of construction. 

11. Construction Method

Under this factor, a balance of build-ability and performance is achieved. For this, the companies hire the team that is going to work to construct the extension or house on board beforehand. The methods used to build are less prone to risk and are used by the team more often. Certain methods are cheaper and easier to achieve a defined fabric performance. 

12. Finishes

The cost of finishes can be easily overlooked. In most cases, the finish of a project is the least important element to spend money on. Finishing touches accentuate the feel and look of a space but they are easily replaceable in the future. Paints, timber floors, expensive tiles, and bespoke joinery are all fancy but they can escalate the costs real quick. 

Other Factors Affecting Project Cost

You should also budget for these construction costs that you might have to pay. 


It is impossible for a project team to foresee every possible eventuality and cost. If you set aside 5 to 10% of your construction budget for these unexpected extras, you would not run out of funds during construction. 


Prioritisation is vital when it comes to managing construction costs. Establish what your home needs the most and what can be ignored. It is vital to not compromise on certain elements because of the increased expenditure on certain others. 

Do Delays Impact the Construction Cost?

The speed of the project is one of the major factors that influence construction costs. Delays in construction due to unmitigated circumstances can gravely impact the stipulated budget. 

Delays in construction can result in the following problems:

  • Increase in the equipment rents
  • Extension of insurance, securities, and construction bonds
  • The wages of labour and contractors might go up
  • The occurrence of overhead costs due to the inefficient use of equipment
  • Rise of material prices in the meanwhile
  • Storage cost of the raw materials, as they cannot be left in the open

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    Q 1. What are the factors that influence construction costs?

    Ans. Factors that influence construction costs are permits, land acquisitions, and life cycle costs among others.

    Q 2. What is included in the house construction cost?

    Ans. Finishing work and civil work are the two factors that determine the house construction cost. These are the major factors affecting project cost.

    Q 3. How to cut down on the cost of construction?

    Ans. Try to reduce the cost of raw materials to cut down the cost of construction. To save on long-term costs, invest in low-maintenance materials for construction.

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