Property prices are expected to rise in the range of 10-15% in the next 3-6 months as developers are unable to absorb further the rising prices of key raw materials like steel, cement, copper, PVC etc and would be forced to pass on the burden to buyers, the apex body of real estate developers, Credai said on Tuesday.
“It is a major concern and we feel construction costs have risen by about 25-30%, which may have a bearing on apartment prices over some time. Over the next 3-6 months, we expect property prices to go up by 10-15%. For the last 5-6 years prices have not risen,” Credai national president, Harsh Vardhan Patodia told FE.
It will be a weighted price rise. For instance, for the higher end market, prices may not go up so much. However, for affordable housing projects the price rise percentage may be slightly higher, he added.
Credai ruled that rise in prices of steel bars along with cement has added fuel to fire. Besides, prices for plastics, man-made polymers and resins, used in piping and insulation have been rising rapidly in the last 8-12 months. Supply chain disruption is also exacerbating the situation.
For instance, prices of various grades of steel have increased in the range of 60-100% between July 2020 and May 2021. Following the price hike in May 2021, the price of the hot-rolled coil (HRC) rose to Rs 72,000 per tonne, the highest since 2008. In July 2020, HRC was priced at Rs 36,500 a tonne. Similarly, cement prices inched up more than 50-70% from 2020 to 2021. The average retail price of cement is Rs 420 a bag, at present, whereas the same in FY20 was Rs 280. Many fear that this price is likely to increase further in the coming months.
Trehan Developers managing director, Saransh Trehan pointed out that construction costs rose by 10-20% compared to last year. “Developers are left with no elbow room to absorb this increase in raw material cost, unwillingly developers will have to offset the increase in cost by increasing the price to some extent,” he added.
Luxury real estate developer, Silverglades’ CEO, Anubhav Jain said that raw material costs of cement and steel have gone up significantly in the last few months. “Given that most developers are operating on very thin margins in the present market condition, there is huge pricing pressure. We are evaluating our input cost, if need be, we will also have to increase the price,” he said.
Suggesting relief measures, Patodia said the government can consider either allowing an input tax credit for real estate projects and/ or rationalisation of GST on various construction raw materials from their current rates.