The continuous upsurge in raw material prices will increase the project cost and will have a cascading effect on homebuyers
INDIA: CREDAI has written to the Hon’ble Prime Minister & all concerned Ministries and urged them to take note of cartelization by cement and steel manufacturers. CREDAI also requested the Government for an immediate intervention in regulating the prices of construction raw materials amidst the ongoing pandemic as Indian real estate is one of the worst-hit sectors due to the COVID 19 pandemic.
With a continuous and sudden upsurge due to cartelization in the prices of steel, cement, and other raw materials, real estate developers are experiencing an inevitable increase in construction cost and are faced with a situation that will create a delay in delivery, stalling of projects in some cases, thereby impacting the homebuyers at large. Builders are facing an uphill task of further convincing the customers of this additional burden.
High prices of cement and steel have been a serious concern and many industry leaders and Ministers have expressed their concern on many public platforms too. Hon’ble Minister of State for Road Transport and Highways, Shri V K Singh warned cement companies against cartelization at an industry event in September 2020.
Shri Nitin Gadkari, Hon’ble Minister for MSMEs and Road Transport and Highway, had also cautioned steel and cement manufacturers for the irrational upsurge in prices and has raised this issue even with the PM.
The pandemic struck the Real Estate industry has been hit the most with an exponential increase in prices of raw materials.
“The real estate sector has been working on wafer-thin margins and is battling unsold inventory on one hand and unfinished projects due to lack of funds on the other. With a stagnant demand, developers have not increased the prices and are selling projects at affordable rates. Indian real estate sector plays an important role in strengthening the economy. Besides employing more than 40 Million workers the sector also is a key partner in many Central Government schemes like Affordable Housing, Housing for All by 2022 and supports more than 250 ancillary industries. But the sector feels ignored because of a lack of support from the Government on various issues. There is an urgent need to control the spiraling cement, steel & other raw material prices and I urge the Government to take necessary steps at the earliest” said Mr. Jaxay Shah, Chairman, CREDAI
Cement prices have increased by more than 23% and steel prices have increased by more than 45% since the beginning of this year.
In January 2020, cement price (50 kg bag) was around Rs 349 per bag and has now increased to Rs 420 – 430 per bag in December 2020.
Similarly, the steel manufacturers too have been taking undue advantage of the increase in demand for steel and have been increasing the prices every month. At the beginning of this year, the per tonne rate of steel was Rs 40, 000 and has now rocketed to Rs 58,000 in December 2020.
The continuous price hike is a classic case of cartelization by cement and steel manufacturers. The increase in the price of steel not only affects the real estate sector but has been affecting other sectors.
Satish Magar, President, CREDAI in response to the spiraling price hikes of construction raw materials said “Like all sectors the real estate sector too has come out of near-zero business in the first 2 quarters and was hopeful of revival during the festive season. High raw material costs make projects financially unviable and are causing distress amongst developers. I humbly, request the Government to do the necessary and arrest the price hike of cement, steel”
Any increase in raw material cost will lead to an increase in construction costs and overall project cost. As a result, many developers will be forced to halt construction work, thereby impacting the delivery of the projects, and so on. This will have a cascading effect on the homebuyers also.
This abrupt increase in the prices is highly unethical and amounts to unfair and restrictive trade practices. The real estate sector had already been facing headwinds owing to stalled construction due to COVID-19 for the most part of the year. Now the continuous and unchecked surge in the basic raw materials has created a deadlock and added to the uncertainties amongst the developer fraternity.