Residential projects in Kolkata may cost 10-12% more this fiscal, says Credai

Price of residential projects in Kolkata and the suburbs are likely to move up between 10 and 12 per cent inthe current fiscal in the wake of rising cost of construction materials such as cement and steel.

The impact, according to Sushil Mohta, President, Confederation of Real Estate Developers’ Associations of India (Credai), Bengal, will be felt most in the lower categories.

Projects priced at sub Rs.4,000 per sq ft will be hit by the price rise. For those, priced above Rs.4,000 per sq ft, the increase in costs is likely to be absorbed by developers.

“Construction costs are moving up by 10-12 per cent every year and these will be passed on to the end user thereby resulting in a similar increase in real estate prices this year,” he told BusinessLineduring an interview.

Approximately nearly 15,000housing units come up in Bengal of which 70 per cent falls under the affordable housing category (priced between Rs.20 lakh and Rs.40 lakh). Mid-end and premium projects comprise the remaining 25 and 5 per cent respectively.

Most of the growth in the affordable segment, he pointed out, will be in the fringe and surrounding areas of the city such as Garia, Baruipur, Narendrapur and in the periphery of New Town.

Metro Rail extension will play a major role in growth of real estate in these areas. Real estate projects in the city proper will however, be placed, at a premium.

Credai Bengal, according to Mohta, is also exploring options for bulk purchases from suppliers to overcome cost variations.

“We are trying to work out options so that we get the cost benefits and, how we can pass it on to the end user,” he said.

Around 20 per cent increase in demand is expected this year despite the price rise.

Problems

Another major issue that developers face here in Bengal is the absence of skilled workers.

Low wages – of Rs.350 per day as compared to 500 in other States – coupled with rising popularity of the Mahatma Gandhi National Rural Employment Guarantee Scheme has seen a flight a labourers from the State. This, Mohta claimed, has led to a shortage in skilled labourers, thereby, leading to a delay in completing the projects. As a result, the cost goes up.

The other point is the existence of the Urban Land Ceiling Act. Credai,had on previous occasions sought abolition of the Act and cited it as a hindrance to real estate projects.

“Even if the Act is not abolished, enabling provisions should be there that will help real estate developers procure land easily,” he said.

Citing the need for obtaining faster clearances, the Credai President said faster approvals can lead to reduced delays in completion of projects. And, hence, result in cost benefit. Business Line