The Confederation of Real Estate Developers’ Association of India (CREDAI) has expressed concern over the sustained increase in price of construction raw materials including cement & steel.
Historically, prices of almost all materials & commodities shoot up whenever there is a consistent increase in fuel price but the prices of construction raw materials have been increasing consistently since January 2020.
Add to this the delays in construction caused by lockdowns, curfews, shortage of labour leading to increased labour cost leading to a direct increase in construction cost anywhere between 10% to 15% in the last 18 months.
Developers highlight that this is a multifaceted issue as RERA doesn’t allow the flexibility to escalate selling price even if the construction costs go up substantially. Last year, CREDAI wrote to various central government departments expressing concern over the steep hike in prices of materials and has been highlighting the issue on multiple platforms.
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% to offset the increased cost of construction.
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. The developers may not be able to absorb escalating costs and unfortunately may have pass on the burden onto homebuyers. CREDAI urges the government and relevant Ministries to address this issue and tackle the prices rise at the earliest.”
CREDAI says one way of addressing this issue could be to permit escalation of prices by allowing a clause in the buyer seller agreement. 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 as this would have a bring down the prices of residential properties immediately.
If these steps are not taken immediately, property prices across all segments will shoot-up directly hampering the affordable housing & housing for all missions of the government
Property prices may go up by 10-15% due to rise in raw materials cost: CREDAI
Delays in construction caused by lockdowns, curfews, shortage of labour leading to increased labour cost leading to a direct increase in construction cost anywhere between 10% to 15% in the last 18 months.
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