23 , March , 2022
CREDAI-NCR has informed that its developer members have decided to halt the construction work because of steep rise in the cost of raw materials. The cost of construction has considerably gone up by almost Rs. 500 psf and this could result in increased housing prices.
The cost of raw materials has gone up by a weighted average of about 30 to 40 per cent recently while the cost of few items has increased by more than 100 per cent in the last 2 years. The sudden and rapid rise in costs has eaten into the thin margins of realty projects and rendered them unviable, reads a statement issued by the realtors’ body.
The developers are in fact planning to stop buying raw materials because they feel that the inflated costs eventually lead to their project getting stalled, informed CREDAI-NCR.
The inflation in the cost of major raw materials like steel, cement used in construction have gone up sheerly because of global supply chain disruptions.
Pankaj Bajaj, President, CREDAI-NCR, stated, “For steel particularly, the situation is so bad that suppliers are not willing to take orders even at elevated prices”.
As per the realtor’ body, the current repercussion of construction cost is about Rs 500 per sq ft or more which will reflect in increased prices for home buyers 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,'' Bajaj added.
CREDAI further informed that over the past two years, the cement prices have gone up from Rs. 270 per bag to Rs. 360 per bag.
