Builders in wait & watch mode

Hyderabad: Contrary to the regular trend of homebuyers play a waiting game, builders and developers across the country are currently in a wait-and-watch mode and most of them have put a halt in their construction activities. Thanks to the unusual rise in the cost of various raw materials like steel, cement, aluminum, PVC, doors, windows, pipes, resins, paints and hardware items.

Immediately after Covid-19, the war between Russia and Ukraine is creating the shortage of several raw materials. The ongoing war and worsened supply fears also led to some unfair practices like hoarding and black marketing of these items. There is a lot of uncertainty in the real estate business environment.

The real estate sector has been facing several challenges from the past few years in the form of demonetisation, goods and services tax (GST), real estate regulatory Act (RERA), pandemic-led restrictions and now the additional cost burden due to increased raw material prices. With all these, the cost of acquiring or building new homes is also expected to increase drastically.

The cost of raw materials like steel and aluminum is on an upward spiral. Over a period of one year, the steel price has more than doubled from Rs 40,000 per tonne to Rs 90,000 per tonne, the aluminum prices increased by 50 per cent, and the cement prices jumped from Rs 275-300 per bag to Rs 450-500 per bag.

"In such a situation, the builders are likely to increase the property rates to accommodate the price hike. Each developer may approximately increase 10-15 per cent on their present selling price to pass on the extra burden to the consumer," says Gummi Ram Reddy, National Vice President of Confederation of Real Estate Developers' Association of India (Credai).

He further said, "Barring few cities, real estate sector is in turbulence across the country. The Central and State governments shall intervene to save this sector. It is possible to deliver affordable housing units if the governments provide some incentives to the sector in the form of reducing stamp duty or a cut down in the land rates."

At the same time, the builders are asked not to stop the ongoing construction work anywhere in the country. Already, developers from tier-2 and tier-3 cities are facing issues with the stoppage of construction activities as re-mobilising is another big issue. They were unable to mobilise funds from the banks as well as from the home buyers.

National Real Estate Development Council (Naredco) Vice President – South Prem Kumar Polavarapu said, "There is a sudden spurt in the prices of raw materials like steel and cement. This is not because of regular reasons like power shortage in summer. We could sense a cartelisation of cement manufacturers behind this abnormal spike in the prices."

He adds, "The realtors get beating in the short run, but consumers take heavy beating in the long run. Unless the government has to come down very hard on the cartels to bring down the prices, there will be triple effect on the economy. The real estate sector contributes almost 8 per cent to the GDP. It is a huge employment generator and supports 183 ancillary industries."