There is a high probability that the prices of residential properties will go up by 10-15 percent to offset the increased cost of construction
Realtors’ apex body CREDAI on Tuesday expressed concern over an increase in the rates of cement and steel during the past one year and said housing prices could rise 10-15 percent if the prices of construction raw materials do not fall. The industry body demanded that the government should take measures to control the prices and suggested reduction in GST for construction raw materials.
The Confederation of Real Estate Developers’ Association of India (CREDAI), which has over 13,000 member developers, pointed out that the prices of construction raw materials have been increasing consistently since January 2020. Moreover, the association said the delays in construction caused by lockdowns, curfews and the shortage of labour resulted in a direct increase in construction cost anywhere between 10 percent and 15 percent in the past 18 months.
“If the prices of a higher raw materials do not start decreasing in the immediate future, there is a high probability that the prices of residential properties will go up by 10-15 percent to offset the increased cost of construction,” CREDAI said in a statement.
Harsh Vardhan Patodia, president, CREDAI National, said, “We have been consistently witnessing sharp increase in the raw material prices over the last one year and they don’t seem to be decreasing or stabilising in the near future.” He said the developers might not be able to absorb escalating costs and will pass on the burden onto homebuyers.
Patodia urged the government and relevant ministries to address this issue and tackle the prices rise at the earliest. CREDAI suggested that the government can permit escalation of prices by allowing a clause in the buyer-seller agreement.
“The government may also consider either allowing input tax credit for real estate projects and/or rationalisation of GST on various construction raw materials from their current rates,” it said. If these steps are not taken immediately, property prices across all segments will shoot up, directly hampering the affordable housing and housing for all missions of the government, CREDAI said.
Anarock Chairman Anuj Puri said, “We have to give credit where it is due despite the massive increases in input costs for developers since the pandemic took hold, they held on to the low property prices as long as possible in order to foster and nurture demand.” However, he said it was evident that sooner or later developers will have to hike their prices. “The hikes in the cost of construction materials are too severe to absorb any further without impacting buyers. Inflation has impacted our lives at every level, and real estate construction is certainly no exception,” Puri said.
Gurugram-based SilverGlades Group CEO Anubhav Jain said, “Raw material costs like cement and steel have gone up significantly in the past few months. Given that most developers are operating on very thin margins in the current market condition, there is a huge pressure on pricing. We are evaluating our input cost, if need be we will also have to increase the price.”
Trehan Developers Managing Director Saransh Trehan said the construction cost has already gone up by 10-20 percent compared to last year because of the increase in the cost of raw material as well as labour charges. “Developers are left with no elbow room to absorb this increase in raw material cost, unwillingly developers will have to offset the increase in cost by increasing the price to some extent,” he added.