Rising costs of construction material may force builders to increase prices by almost 10-15 as early as April, real estate body CREDAI-MCHI, the Maharashtra chapter of Credai, said on March 28.
It urged the Centre as well as states to reduce stamp duty and goods and services (GST) rates and also allow input tax credit (ITC) to developers to give relief to the industry.
"While the real estate market has witnessed growth, the rising cost of construction dampens the momentum," CREDAI-MCHI President Deepak Goradia told reporters.
Steel prices were up from Rs 35-40 a kg to Rs 85-90. The price of cement had gone up by around Rs 100 a bag. Fuel and transportation costs were also up and together these had resulted in a 20-25 percent increase in the overall construction cost, he said.
The association would not advise member developers to stop construction works but if prices continues to rise then the builders would have to halt work and defer purchase of raw materials.
“As a responsible body and a developer we are governed by various laws, including RERA, and we are committed to timely possession of projects to our customers. We would not advise any developer to halt construction,” Goradia said.
Secretary Dhaval Ajmera said the construction cost had gone by Rs 400-500 a square feet, primarily in the last 45 days, affecting the affordable housing segment the most as also mid-segment housing.
“In some cases margins have been completely wiped out or are thin. Given the situation, we are left with no choice. There is a price rise of about Rs 400-500 per sq ft and prices may increase as early as April,” he said.
It was the global situation and not cartelisation, Ajmera said. They would continue to talk to the government for a reduction in steel exports, input tax credits being allowed under the GST scheme and the tax-saving option of section 80-IB to be extended to the affordable housing category, he said.
The Maharashtra government should consider reducing stamp duty from 5-6 percent to 3 percent to mitigate the impact of rising in raw material prices that had gone up due to the Russia-Ukraine war. He also demanded that the export of cement and steel be halted.
“The stamp duty reduction by 2 percent and 3 percent by the Maharashtra government last year had helped push momentum,” he said.
Ajmera said some builders could increase the price of unsold inventory by 10-15 percent to make good the rise in the price of raw materials.
He said the rising prices may force builders to cut down on amenities. "This move will not only impact the 2,773 projects which were approved by MCGM (Municipal Corporation of Greater Mumbai) in 2021 but many more to the extent of 2,60,000 units over the course of the next three years," CREDAI-MCHI said in a statement.
Goradia also said that builders may approach RERA authorities to include an escalation clause in the buyers’ agreement.
Trehan Group MD Saransh Trehan said cement and steel prices had gone up sharply. "This has led to a sharp increase in our per square feet construction cost. We have not been able to pass on the increase in input cost to customers but the relentless rise in input costs is hurting our profit margins in a big way, and forcing us to think about the future course of action," he said.
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