The average cost of construction has gone up by 10-12 per cent in a year over the last one year due to rise in prices of raw materials like cement and steel. The prices of cement and steel have gone up by 20 per cent per year, according to property consultant Colliers India.
When the real estate sector is going to be back on the rails after the Covid-19 situation, rise of building materials cost has begun. The developers were well aware of the hike, but failed to act on it. Now, they have begun to feel the heat, leading to embarking on an exercise to unfold a pricing strategy, a report by Colliers said.
Colliers India CEO Ramesh Nair has explained that the developers have been somehow going along even though the profit margin in realty sector is very less for the past several years. The rise in prices of the building materials is causing them inconvenience. He opined that the cost of construction is likely to increase further by 8-9 per cent by December this year.
Affordable houses and mid-segment projects are described as low-profit margin projects. In this background, the developers find no alternative except passing the buck to the customers. As such, the developers are under a lot of stress, according to the Colliers India Chief Operational Officer.
According to Tehran Group MD Saransh Tehran, relief can be provided to builders by easing the taxes on imports. During the past two years, prices of cement and steel have gone up to a large extent. While the steel prices increased by 100 per cent, the cement price has increased by 30 per cent. Similarly, materials like aluminium, electric wires, paints and stones prices have gone up by 50 per cent, increasing the cost of construction accordingly. That is why, the developers are forced to take a decision.
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