Rising construction costs may soon leave homes costlier, say builders, who blame it on the Ukraine war. The Nagpur unit of Confederation of Real Estate Developers of India (Credai) has also sought government intervention in the matter.
Credai has demanded a government probe to find out whether the price rise is due to cartelization in the steel sector. Builders, however, also attribute it to the war in Ukraine. The conflict has added to the rise in prices of construction material, especially steel, apart from plastics and other alloys that go into building real estate, they say.
The builders claim that it may ultimately lead to an increase of 20% to 30% in the selling price of real estate in new projects.
A note shared by Credai says rates of steel have doubled to ₹84,000 a tonne since a year. A bag of cement now costs ₹400 a bag. The two components make up 40% of the total construction cost. Bricks, which cost ₹6,500 per thousand are now ₹8,000. Cost of other items like wires, fittings, aluminium and even wages have gone up by 40%.
Gaurav Agrawala, secretary of Credai, says from the earlier base level of ₹1,800 per square feet the construction cost may easily cross ₹2,100 and in premium projects it would go to ₹2,500 a square feet. This may lead to a hike of ₹300 per square feet in sale price too, he said. Agarwala said he plans to hike rates of unsold units at one of his projects at Lakadganj to meet the increased cost.
In October-November last year, diesel rates had an impact on the sale price, which increased by Rs100 to 150 a square feet, he said.
He said the war has led to a major increase in price of coking coal, which is used in steel making. Even prices of iron ore, the raw material for steel, have gone up.
A month ago, iron ore was at ₹4,000 a tonne, it is now in the range of ₹7,500 to ₹8,000, taking steel prices to a record high.
Dipen Agrawal, a steel trader and president of Chamber of Associations of Maharashtra Industry and Trade (CAMIT), said there has been an increase of almost 40% in steel rates since the war. This is because Ukraine is a major producer of steel, which also caters to demand in Europe. The war has led to a demand from other sources too.
Virendra Kukreja of M/s Kukreja Infrastructure said more than the war steel prices have gone up due to cartelization. “The central government must intervene in it. This may increase the cost of construction by ₹100 odd. The impact may be higher in some projects,” he said.
Anil Nair of M/s Pioneer Constructions said apart from steel price, a number of alloys and even plastic material now cost more.