Real estate developers in Maharashtra have approached the state Real Estate Regulatory Authority (RERA) to allow them to extend the project delivery timelines by about six months, as rising inflation in key commodities like steel and cement is making it difficult to continue construction. However, a section of developers clarified that they are not looking to halt construction.

Last week, CREDAI Maharashtra has written a letter to Ajoy Mehta, chairman of Maharashtra RERA stating that they will be forced to halt purchase of raw materials due to the upward spiral in prices, which in turn will impact timely construction of projects in the absence of the extension.

“It has become very difficult for the builders and developers to complete the project in the declared selling price, as the cost of construction has increased day by day. The developers are going to pause/stop the construction work for sometime to avoid purchasing the raw material with inflated price as it has become unbearable. It is understood that a period of 3-6 months will be required to settle down the raw material prices and to restore the post war effects,” Sunil Furde, president, CREDAI Maharashtra said in the letter to Maha RERA.

Developers said that the commodity prices which have been rising for the last two years, have seen a further increase since the start of the armed conflict between Russia and Ukraine leading to construction cost increase of 500 to 700 per square feet.

Kapil Gandhi, convenor PR, CREDAI Maharashtra said that smaller developers, and those in tier II and III cities are finding it particularly hard to sustain construction activity at the present inflation levels. “The developers in smaller cities of Maharashtra have a selling price of `3,000-4,000 per square feet, with cost escalations as high as this they will not be able to continue with construction activities and would like to stop purchases for sometime till the situation stabilises,” he said.

However, Boman Irani, president, CREDAI-MCHI told FE, “We are closely monitoring the situation and are presently not looking at discontinuing construction activities which can impact the project delivery timelines. As a responsible body, we are looking at different measures which can help us to control the rising costs of raw materials as well as spiralling construction costs. We are also in active dialogue with the concerned authorities for helping us to keep prices under control by expanding concessions etc and will chart out next steps accordingly.”

While some branded and tier I developers have been able to hike prices in cities like Mumbai and Pune to the tune of 7-10% in new projects, developers are concerned that price sensitive consumers in smaller cities will immediately retreat if prices are increased in those places, and holding back hikes.

Added to this, Real Estate (Regulation and Development) Act, 2016 states that if developers have sold 50% of their housing stock at a certain price, they cannot charge an escalation as per the RERA Act. This is making it hard for developers to pass on the cost increases. They cannot slow down the construction either, because missing delivery timelines is penalised under RERA, which is the reason an application has been given to the regulator for the concession.

There has been an about 45% increase in the prices of key commodities used in real estate since the start of the pandemic. Steel, for instance, has increased by 113%, cement by 33%, plumbing material by 110%, grill by 67%, among others.