40% of developers have cited their apprehension of being able to sustain their business as the woes deepen on developers owing to the rise in input costs

By Varun Singh

CREDAI’s Impact Analysis Report 2022 says 39% of developers projects rendered totally unsustainable due to spiraling price rise of raw materials; seek urgent Govt. intervention.

46% of developers foresee a delay in delivery timelines of ongoing projects.

76% of developers will only be able to continue for another six months if they can’t seek any respite from the escalating costs.

Almost 40% of developers have cited their apprehension of being able to sustain their business as the woes deepen on developers owing to the rise in input costs, mentioned an ‘Impact Assessment Survey’ report launched by CREDAI on Tuesday, at an event in Delhi, to highlight the negative effects of the deepening crisis as they augured responses from close to 1,850 developers across the country. 

The survey also indicates a steep rise of 20% in the cost of construction by 78% of the developers and predicted that it would lead to an increase of more than 10% in the prices of properties.

While the rise in prices has been an ongoing issue for the past two years, the current situation which has resulted in prices of some of the raw materials skyrocketing by about 115%, has made it impossible for developers to deal with the imbroglio. Developers have continuously communicated the rise in cement costs which have risen by more than Rs 100 a bag, while steel prices have risen 2.3 times from Rs 39,000 a metric tonne last year to Rs 90,000 as of date. The negative impact will Nonetheless, the industry has continued to stay resilient amidst a 40% increase in raw material prices.

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However, 46% of developers have also stated how this may impact the delivery timelines of their ongoing projects. And most of the developers (66%) feel forced to temporarily stop procurement and shut construction sites, while 76% even believe that they can only continue for another six months if in case raw material prices do not correct and if they can’t find immediate relief from the ongoing situation. 

The impact is most in tier 2&3 cities as the % increase of input prices compared to the selling price per sqft is unprecedented. Being the 2nd largest employment generator in the country, any slowdown or stoppage in work would directly impact the labour force and their livelihoods across 250+ allied industries. 

As projects become unviable to continue for most of the developers CREDAI’s President, Harsh Vardhan Patodia, said, “For the last one year, developers have been able to absorb the rise in the cost of construction to steer the industry’s growth, post the pandemic. However, with thin margins, this will eventually have to be passed on to the buyers which may not augur well for the industry’s growth momentum. As the apex body for the real estate in the industry, we have been in dialogue with concerned ministries to seek their intervention to avoid any delay in the delivery of projects for homebuyers, help kickstart stopped projects, and save numerous jobs as the industry supports 251 ancillary industries linked to it.”

He further stated, “Our recommendations included measures such as cracking down on cartelization in the steel and cement supply and setting fixed prices of raw materials. Additionally, providing GST input credit on building raw materials, incentivizing or subsidizing customers through stamp duty discounts or waivers, and reducing Interest Rates will also help in restoring the growth impetus for the industry and help provide some respite as well. Explaining how the impact has trickled down to other sectors, he added, “The effects of escalating raw material prices have not only affected the real estate industry but has affected industries agnostic of their business as even FMCG makers deliberate increasing prices of their product by 10% and an eminent player in the auto industry has already increased their prices by 9% and reportedly still not managed to cover the input cost inflation.”

Also Read: Sentiments improve for real estate with Q1 2022

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