Abstract: Construction projects have been inundated by cost and schedule overruns. In too many cases, the final project cost has been higher than the cost estimates prepared and released during initial planning, final design and estimation or even at the start of construction. Over the time span between project initiation, concept development and the completion of construction many factors may influence the final project costs. Organizations face a major challenge in controlling project budgets over the time span between project initiation and the completion of construction.
In theory cost may overrun or under run in construction projects. But the frequency of overrun is much higher when compared to under run. Cost escalation in construction project refers to anticipated increase in cost of constructing a project over a period. Cost increase usually occur as a result of market forces and reflect increases in the cost of material/ labour and higher levels of construction activity. Escalation is usually calculated by examining the changes in price index measures for a good or service. In cost engineering and project management usage, escalation and cost contingency are both considered risk funds that should be included in project estimates and budgets. The focus is on deriving conclusions from the study undertaken and making recommendations to stake holders in construction industry regarding their responsibilities to overcome the problem of construction project cost escalation. In this paper we studied what factors affect cost escalation, various methods which are used to calculate cost escalation as well as how COVID-19 has affected construction industry as well as residential construction sector.

Keywords: Construction Projects, Schedule Overruns, Project Costs, Cost Overrun, Cost Escalation, Price Index, Cost Contingency, COVID-19, Construction Industry, Residential Construction Sector.

| DOI: 10.17148/IARJSET.2022.94111