Rising raw material prices, a major concern for the real estate industry

New Delhi, November 19, 2021: For the last few years, one of the major factors affecting the property prices is the raw material cost. The rise in prices of steel bars along with cement has added fuel to the construction budget crisis. Also the prices for plastics, man-made polymers and resins, used in everything from piping to insulation have been rising rapidly over the past few months. The pandemic-induced spike in prices of essential raw materials and the shortage of supply with traders have emerged as a challenge for many developers across the markets. Many housing projects, which were resumed after the second wave of the pandemic, are likely to slow down again owing to this new raw materials crisis.

Here is what the real estate industry has to say about the price hike:

Mr. Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty, and Hon. Secretary, CREDAI MCHI
“After the pandemic, we have had a strong recovery in the real estate sector thanks to the favourable Government policies along with a record breaking festive season supported by developer discounts and attractive payment plans. Now, the steep rise in the raw material prices may impact the property prices in a big way, spoiling the home buyers’ dream of buying a property. Going forward, if the prices don’t drop, the developers will have no option but to pass the additional cost to the consumers as is happening in all other industries. We at CREDAI-MCHI are constantly appealing to the Government and relevant suppliers to curb the sharp increase in input cost of raw materials so that the momentum in the housing sales that is built during the festive season sustains.”

Mr. Sandeep Runwal, President-Elect, NAREDCO Maharashtra and Managing Director, Runwal Group
“We are in talks with the central government to immediately look into the rising prices of the raw materials to curb the increased difficulties faced by realtors and buyers. Along with the iron and cement prices, the copper and aluminium prices have also increased which has impacted the construction cost. If the prices do not reduce in the coming future, there are high expectations of cost to upsurge around 10-12% unanimously. The burden might be shifted to the homebuyers resulting in a flunk in the sales of the properties and directly hitting the growth numbers of the industry. At the time when the real estate industry has recorded good sales numbers during the recent festive season, the rise in the raw material prices will put brakes on the recovery of the sector.”

Mr. Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory
“The real estate prices have not gone up in the last couple of years despite the sector being suppressed by a volcano of disruption resulting in sluggish market economics. The choking of liquidity, subdued demand, muted investment, and consecutive structural reforms led to system reboot. The Covid-19 pandemic crisis brought real estate to grind halt with stoppage of construction sites, migration of labourers and travel restriction halting sales visit. However, the sector played the role of a Samaritan by not passing the burden to the home buyers. Today, the developers are operating on a thin margin and despite the many challenges faced by developers, the property prices across the segment are still rationalised because we don’t want to hurt the positive sentiments of the consumers. However, if the critical raw material price and construction cost continues to surge at a rocket pace then the sector will be compelled to pass the burden on the home buyers. If the current trend continues in the steel, cement, and other key allied industries, then, there are chances that the property prices are likely to shoot-up 15-20% in the next six months.”

Mr. Cherag Ramakrishnan, Managing Director, CR Realty
“The cost of some of the raw materials has gone up significantly in the last few months, making it unrealistic to retain the pricing in real estate projects. At the point when real estate in India had begun showing some strong signs of long term recovery, a steep jump in the costs of key raw materials like concrete, and steel, and so forth, has intensified the issue further. There is an immediate requirement of government intervention to control the consistent upsurge, otherwise, the developers and eventually the homebuyers will face a massive burden of the rising costs leading to higher property prices. This could also slow down the current momentum in sales that is being achieved due to rational pricing by the developers.”

Mr. Vinay Kedia, Director, Prescon Group
“Post pandemic has been challenging for the real estate sector but the industry has shown a strong recovery since the end of 2020 especially with record-breaking festive sales this year. We have witnessed a sharp increase in the raw material prices over the last year and it does not seem to be stabilizing in the near future. The developers may not be able to sustain the escalating costs and unfortunately, the pressure would be shifted to the home-buyers. If these steps are not taken immediately, property prices across all segments will shoot up directly hampering the dream investment of the home-buyers and negate the savings arising out of all-time low housing loan interest rates.”

Corporate Comm India (CCI Newswire)