The increasing prices of raw materials, including steel and cement, has become a major cause of concern for the Indian real estate industry.
The existing 28 per cent GST on both is adding more burden, according to the developers.
Hitesh Thakkar, vice president, NAREDCO West and partner of Prem Group, speaking to the Free Press Journal said, “Taking 28 per cent GST on cement and steel from developers is incorrect, especially when the raw material prices are already high. NAREDCO, the apex real estate body, has already made representations requesting the government to reduce the GST.”
Thakkar added that imposing such a high GST will have an impact only on the end users – the homebuyers. Builders will eventually take the prices by increasing the cost of houses, he said.
According to the real estate expert Colliers India, “Over the last one year, developers’ average cost of construction has risen by 10-12%, owing to higher input cost due to supply-side constraints. The cost of key materials like cement and steel has risen over 20% yearly as of March 2022. These constitute a predominant share of the total cost of construction.
Expressing concern about rising prices of raw materials, the Builders Association of India’s (BAI) newly-appointed president Nimesh Patel has written a letter to Prime Minister Narendra Modi regarding the plight of the construction industry, particularly, the challenges in the infrastructure and housing sectors in light of the abnormal price rise.
BAI is the apex all India association of civil engineering construction contractors and real estate builders with more than 40,000 members and 200 Centres pan India.
Patel said, “To counter the cartelisation by cement manufacturers, the government of India should appoint ‘Cement Regulatory Authority’ similar on the lines of RERA.”
Patel further added that a unified standard contract document’ is to be adopted by all work authorities throughout the country including local bodies, state governments and corporations to weed out the differences of benchmarks.
“This should be irrespective of the amount and time duration of the contract value and should ensure the reimbursement of increased construction material price with inclusion of star rate/basic rate policy,” he stated.
“The new ‘standard contract documents’ should also ensure the dispute resolution mechanism with proper Arbitration Clauses be included with a time-bound decision on disputes raised out of a contract,” Patel explained.
Commenting on BAI’s demand, Thakkar said that the Competition Commission of India (CCI) is already there which takes action against manufacturers found doing cartelisation. All developers can complain to the CCI. Having another regulatory authority will only lead to duplication and increase the bureaucratic cost of operations, he said.
Other leading developers like NAHAR Group vice-chairperson and senior vice president NAREDCO Maharashtra Manju Yagnik have urged the Indian government to impose a ban on steel export so as to cap the increasing prices.