By Raghavendra Kamath
Top property developers are set to increase home prices again in the coming months on higher input costs. Though the prices of steel and cement have come down, they are still higher than the same period last year.
Most of the developers increased prices by 4-15% in the last one year and are looking at similar price hikes in the coming months to offset input costs.
Tata Sons’ units Tata Realty & Infrastructure and Tata Housing Development Company are looking at hikes in the range of 10-15%.
“Input prices have gone up and so have the costs of FSI premiums, capital and metals. Metal prices may have come down but are still higher than pre-Covid levels,” said Sanjay Dutt, managing director and chief executive of Tata Realty & Infrastructure and Tata Housing.
Dutt said both the companies are increasingly standardising their formats and leveraging scale through procurements to mitigate increase in costs.
Godrej Properties, the real estate arm of Godrej group, has increased prices by 5-7% in Q4FY22 and further by 4-5% in the current fiscal so far, said Mohit Malhotra, managing director and chief executive of Godrej Properties.
“We have taken periodical price increases, which are zone-specific and based on the merit of the products,” Malhotra said.
Reinforcement steel prices shot up by 25-30% on November 21, 2021, and have decreased by ~ 15-18% in the last 5-6 months (April to August), but are still around 3-4% higher today, he said.
Similarly, cement prices increased by ~ 10-12% in November 2021 and have decreased by ~ 2-3% in the last 5-6 months (April to August), but are still around 8-10% higher today, he added.
“We will continue to continuously monitor the situation of changing commodity cost and accordingly tailor our pricing strategy based on the merit of our products. Our endeavour for any potential change in prices would be to strike the right balance between consumer affordability and project profitability,” Malhotra said.
Bengaluru-based Brigade Enterprises has increased prices across its portfolio in the range of 5-8% over the last year, depending on the stages of construction.
“We have seen a very strong momentum in terms of demand in the real estate sector, despite rising input cost, cost of loans and other factors. Prices could increase further depending on the kind of project, micro markets and other macro-economic factors,” said Viswa Prathap Desu, chief sales officer st Brigade Enterprises.
As per Anarock Research, average property prices in the top 7 cities have collectively seen a 4% rise – from Rs 5,727 per sq ft in 2021 to Rs 5,941 per sq ft in 2022 till date.
However, on an average, prices have risen just 2% across the top 7 cities – from Rs 5,599 per sq ft in 2020 to Rs 5,727 per sq ft in 2021. “If we look back and consider the pre-pandemic period, then the average prices in top 7 cities have risen by 6% – from Rs 5,588 per sq ft in 2019 to Rs 5,941 per sq ft in 2022,” said Prashant Thakur, senior director and head of research at Anarock Property Consultants.
M Murali, chairman and managing director at Shriram Properties, expects a price rise of 10-15% in this financial year. Sriram has implemented a price increase of 4% in the past year.
“Since sales in the real estate sector are mainly funded through retail finance institutions, we expect that marginal changes will have a minimal impact on buying decisions,” Murali siad.
Gurugram-based affordable- and mid-income housing developer Signature Global has increased prices by 8.5% in the last year, said chairman Pradeep Aggarwal.
“I Don’t think it will increase this year unless input costs go up. If they go up, we will definitely pass it on,” Aggarwal said..
Shriram Properties’ Murali says that home buyers have not been deterred by the rise in interest rates as people are increasingly becoming conscious of the need for security and stability. “With accelerated hiring in core markets like IT, ITeS and healthcare, purchasing power is increasing, along with disposable income. We expect the festival season demand to be high and firmly believe that this is the beginning of a long-term upward growth for the real estate sector,” he said.
Brigade Enterprises’ Desu also agrees that the buyer sentiment has not been hit. “With Improved purchasing power, we have witnessed a paradigm shift in buyer confidence towards large trusted developers and demand for larger homes that include the work-from-home aspect. Higher disposable income along with lower interest rates have also added impetus to the sector,” he said.