Property Prices May go Up By 10-15% If Construction Material Prices are Not Controlled: Credai

The builders’ body demanded that the government should take measures to control prices of raw materials and suggested reduction in GST for the purpose.

Real estate builders’ body, Confederation of Real Estate Developers’ Association of India (CREDAI), has expressed concern over the sustained increase in price of raw materials including cement and steel and said that housing prices may increase by 10 -15 percent to offset the increased cost of construction.

It demanded that the government should take measures to control prices of raw materials and suggested reduction in GST for the purpose.

CREDAI, which has over 13,000 member developers, pointed out that the prices of construction raw materials have been increasing consistently since January 2020.

Moreover, the association said the the delays in construction caused by lockdowns, curfews and the shortage of labour resulted in a direct increase in construction cost anywhere between 10 percent and 15 percent in the past 18 months.

“Historically, prices of almost all materials and commodities shoot up whenever there is a consistent increase in fuel price but the prices of construction raw materials have been increasing consistently since January 2020. Add to this the delays in construction caused by lockdowns, curfews, shortage of labour leading to increased labour cost leading to a direct increase in construction cost anywhere between 10 percent to 15 percent in the last 18 months,” it said in a statement.

It said that this is a multifaceted issue as RERA doesn’t allow the flexibility to escalate selling price even if the construction costs go up substantially.

“We have been consistently witnessing sharp increase in the raw material prices over the last one year and they don’t seem to be decreasing or stabilising in the near future. The developers may not be able to absorb escalating costs and unfortunately may have pass on the burden onto homebuyers. CREDAI urges the Government and relevant Ministries to address this issue and tackle the prices rise at the earliest,” said Harsh Vardhan Patodia, president, CREDAI National.

One way of addressing this issue could be to permit escalation of prices by allowing a clause in the buyer-seller agreement. The government may also consider either allowing Input Tax Credit for real estate projects and / or rationalisation of GST on various construction raw materials from their current rates as this would bring down the prices of residential properties immediately, it said.

If these steps are not taken immediately, property prices across all segments will shoot up directly hampering the affordable housing and housing for all government missions, it said.

“With rising inflationary trends of input costs like cement and steel, it was evident that sooner or later developers would have to hike prices. The hike in the cost of construction material is severe to be absorbed any further without impacting buyers. Inflation has impacted our lives at every level, and real estate construction is certainly no exception,” said Anuj Puri, Chairman – ANAROCK Group.

“Costs of raw material like cement and steel have gone up significantly in the last few months. Given that most developers are operating on very thin margins, there is a huge pressure on pricing. We are evaluating our input cost, if need be we will also have to increase prices,” said Anubhav Jain, CEO, SilverGlades Group.

Source : Money Control