After Maharashtra developers, realtors in Delhi-NCR threaten to halt construction as raw material prices soar

Representative image.

After the Credai chapter of Maharashtra threatened to halt construction due to rise in raw material prices, developers in Delhi-NCR have decided to follow suit.

“The sudden and rapid rise in costs has eaten into the thin margins of realty projects and rendered them unviable. The developers have decided to halt the purchase of materials fearing these elevated costs will ultimately result in projects getting stalled,” Credai-NCR said in a statement.

This announcement comes after a similar move by developers in Mumbai and Pune.

According to CREDAI NCR, an industry body which represents real estate developers, input costs have gone up by a weighted average of about 30 percent to 40 percent recently and the prices of a few items have increased by more than 100 percent in the last two years.

"The costs of key raw materials such as steel and cement used in construction have gone up amidst global supply chain disruptions. After COVID-19, the current crisis is a dual blow on real estate developers as they are finding it extremely tough to deliver projects within the projected timelines and costs. For steel particularly, the situation is so bad that suppliers are not willing to take orders even at elevated prices,” said Pankaj Bajaj, President, CREDAI-NCR.

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According to the industry body, the recent impact of construction cost is about Rs 500 per sq ft or more which will reflect in increased prices for homebuyers for fresh sales.

“Steel suppliers are even cancelling contracted supplies citing force majeure and the war in Ukraine. However, builders, while free to increase prices of unsold inventory, are stuck where they have pre-sold the inventory. Perhaps this situation should be recognised as force majeure and prices allowed to be escalated even for sold inventory. Otherwise we are looking at the next wave of stalled and unviable projects,” he said.

Claiming that prices of raw materials have increased by almost 40 to 45 percent, Credai Maharashtra has also said that it is left with no option but to temporarily stop the purchase of input materials and shut construction work.

“The prices of steel, cement and other construction materials have been rising steadily over the last two years. These have now skyrocketed at a level, beyond the affordability of many developers, especially in the tier 2/3 cities. As many as 61 city association members who form a part of Credai Maharashtra have been left with no option but to temporarily stop purchases and shut down the construction activities,” said Sunil Furde, president, Credai Maharashtra.

Furde said that rates of steel, cement, bricks, sand and wash sand, electric wires, fittings, tiles, pipes, sanitary-ware, fabrication, sand, secondary minerals and others, have increased by roughly 40 to 45 percent and that the present impact on input costs is about Rs 400-600 per sq ft.

In order to draw the attention of the government on the issue, all members of Credai Maharashtra are planning to stop work. Subsequently, they have also requested Maharashtra Real Estate Regulatory Authority Chairman Ajoy Mehta, through a letter, to extend the last date of completion of projects by six months at least so that developers will get time to hold on till prices rationalise.

Homebuyers against the move

Homebuyers are against the move by builders to stop work in Maharashtra.

“How can they stop construction when they have launched projects and taken the booking amount and subsequent EMIs for the projects. Price rise cannot be a force majeure situation since raw materials are abundantly available,” said Abhay Upadhyay, president, Forum For People's Collective Efforts and member, Central Advisory Council, RERA, MoHUA.

Since the last decade prices of both cement and steel were available at rock bottom prices. Even then they did not complete their projects as is evident from thousands of incomplete and ongoing projects across India, he said.