Difference Between Hard Cost and Soft Cost

Cost is of different types and categorizations, and every industry has a different name given to a particular cost. Although some cost more or less remains the same and is generally considered to be the same within all sectors and industries. However, in real estate, when we talk about construction companies or developers, there is a specific name given to costs: hard and soft costs.

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These two types of costs are used widely in the construction industry. Consequently, the developers and builders are often keen to know which costs are incurred in the construction projects.

Hard Cost vs. Soft Cost Infographics

Key Differences Between Hard Cost and Soft Cost

  • Hard Cost is the kind of cost which is directly related to the construction of a project in the real estate industry. Costs like raw material and direct labor, which result in the construction of a building and increase the percentage of completion of a project, come under hard cost. Soft cost, on the other hand, is not directly related to the physical construction of a building and is not contributing to the construction. These are ancillary costs that are indirectly related to building construction.Hard cost is often referred to as brick and mortar cost encompassing the actual physical construction of a real estate development project. These costs generally cover the labor and material cost. Soft cost, on the other hand, is less obvious than hard cost as it encompasses anything and everything which is not directly related to the physical development of a building.A significant distinction between hard and soft costs is that hard costs don’t occur once the project completes. Whereas on the other hand, the soft cost may or may not continue to incur even after the project completion and delivery. For example, there is a legal case going on the project even after its completion. Hence, the company must incur legal and litigation fees on the project even after completion.Examples of HC are raw material, labor, and fixed equipment, often classified as hard costs. Examples of SC are legal fees, off-site costs, indirect labor, and moveable equipment, usually classified as soft costs. Other examples of hard costs are foundation cost, interior finish, etc.

Comparative Table

Let’s look at the Hard Cost vs. Soft Cost comparison table.

This article has been a guide to Hard costs vs. Soft costs. Here we discuss its top 4 differences, infographics, and a comparison table. You may also have a look at the following articles –

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