Dear homebuyers here’s some bad news for all of you, and I am delivering it directly, but letting the real estate industry break it to you all.
By Varun Singh
Homebuyers wanting to buy a house here’s a bad news that probably no one’s wants to hear.
However, homebuyers cannot evade this news as developers themselves have decided to deliver this news.
Homebuyers prices of homes is going to escalate and builders have claimed they are left with no choice except for increasing the prices.
Builder claims that, prices of almost all materials & commodities shoot up whenever there is a consistent increase in fuel price but the prices of construction raw materials have been increasing consistently since January 2020. Add to this the delays in construction caused by lockdowns, curfews, shortage of labour leading to increased labour cost leading to a direct increase in construction cost anywhere between 10% to 15% in the last 18 months.
Builder claim that a sharp and sustained increase in raw material prices may drive home prices up thus property prices may go up by 10-15% in the near future
Harsh Vardhan Patodia, President, CREDAI National:
We have been consistently witnessing sharp increase in the raw material prices over the last one year and they don’t seem to be decreasing or stabilising in the near future. The developers may not be able to absorb escalating costs and unfortunately may have pass on the burden onto homebuyers. CREDAI urges the Government and relevant Ministries to address this issue and tackle the prices rise at the earliest.
Deepak Goradia, President, CREDAI MCHI:
The last two years have been a challenging road for the real estate sector but the industry has shown a strong recovery since the end of 2020 especially with record-breaking festive sales this year. The real estate industry of MMR is expected to not only bounce back, but surge going ahead supported by the breakthrough move of stamp-duty reduction along with factors such as low home interest loans and discounts offered by the developers. However, consistent hike in the prices of the raw material will shoot up the property prices across all segments hindering the homebuyers’ dream investment. And if this continues, developers will have no option but to pass on the added cost to the consumers. CREDAI-MCHI is in constant touch with various Government agencies and ministries to control/arrest the sharp increase in input cost of raw materials and fuel to stop such unwarranted situations of price rise in housing rates.
Anuj Puri, Chairman – ANAROCK Group:
We have to give credit where it is due – despite the massive increases in input costs for developers since the pandemic took hold, they held on to the low property prices as long as possible in order to foster and nurture demand. However, with the present rising inflationary trends of input costs like cement, steel etc. it was evident that sooner or later developers would have to hike their prices. The hikes in the cost of construction materials are too severe to absorb any further without impacting buyers. Inflation has impacted our lives at every level, and real estate construction is certainly no exception.
Saransh Trehan, Managing Director, Trehan Developers:
Construction cost has already gone up by 10-20 % compared to last year because of the increase in cost of raw material as well as labour charges. Developers are left with no elbow room to absorb this increase in raw material cost, unwillingly developers will have to off-set the increase in cost by increasing the price to some extent.
Anubhav Jain, CEO, SilverGlades Group:
Raw material costs like cement and steel have gone up significantly in the last few months. Given that most developers are operating on very thin margins in the present market condition, there is a huge pressure on pricing. We are evaluating our input cost, if need be we will also have to increase the price.
Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty, and Hon. Secretary, CREDAI MCHI:
After the pandemic, we have had a strong recovery in the real estate sector thanks to the favourable Government policies along with a record breaking festive season supported by developer discounts and attractive payment plans. Now, the steep rise in the raw material prices may impact the property prices in a big way, spoiling the home buyers’ dream of buying a property. Going forward, if the prices don’t drop, the developers will have no option but to pass the additional cost to the consumers as is happening in all other industries. We at CREDAI-MCHI are constantly appealing to the Government and relevant suppliers to curb the sharp increase in input cost of raw materials so that the momentum in the housing sales that is built during the festive season sustains.”
Sandeep Runwal, President-Elect, NAREDCO Maharashtra and Managing Director, Runwal Group:
We are in talks with the central government to immediately look into the rising prices of the raw materials to curb the increased difficulties faced by realtors and buyers. Along with the iron and cement prices, the copper and aluminium prices have also increased which has impacted the construction cost. If the prices do not reduce in the coming future, there are high expectations of cost to upsurge around 10-12% unanimously. The burden might be shifted to the homebuyers resulting in a flunk in the sales of the properties and directly hitting the growth numbers of the industry. At the time when the real estate industry has recorded good sales numbers during the recent festive season, the rise in the raw material prices will put brakes on the recovery of the sector.
Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory:
The real estate prices have not gone up in the last couple of years despite the sector being suppressed by a volcano of disruption resulting in sluggish market economics. The choking of liquidity, subdued demand, muted investment, and consecutive structural reforms led to system reboot. The Covid-19 pandemic crisis brought real estate to grind halt with stoppage of construction sites, migration of labourers and travel restriction halting sales visit. However, the sector played the role of a Samaritan by not passing the burden to the home buyers. Today, the developers are operating on a thin margin and despite the many challenges faced by developers, the property prices across the segment are still rationalised because we don’t want to hurt the positive sentiments of the consumers. However, if the critical raw material price and construction cost continues to surge at a rocket pace then the sector will be compelled to pass the burden on the home buyers. If the current trend continues in the steel, cement, and other key allied industries, then, there are chances that the property prices are likely to shoot-up 15-20% in the next six months.
Cherag Ramakrishnan, Managing Director, CR Realty:
The cost of some of the raw materials has gone up significantly in the last few months, making it unrealistic to retain the pricing in real estate projects. At the point when real estate in India had begun showing some strong signs of long term recovery, a steep jump in the costs of key raw materials like concrete, and steel, and so forth, has intensified the issue further. There is an immediate requirement of government intervention to control the consistent upsurge, otherwise, the developers and eventually the homebuyers will face a massive burden of the rising costs leading to higher property prices. This could also slow down the current momentum in sales that is being achieved due to rational pricing by the developers.
Vinay Kedia, Director, Prescon Group:
Post pandemic has been challenging for the real estate sector but the industry has shown a strong recovery since the end of 2020 especially with record-breaking festive sales this year. We have witnessed a sharp increase in the raw material prices over the last year and it does not seem to be stabilizing in the near future. The developers may not be able to sustain the escalating costs and unfortunately, the pressure would be shifted to the home-buyers. If these steps are not taken immediately, property prices across all segments will shoot up directly hampering the dream investment of the home-buyers and negate the savings arising out of all-time low housing loan interest rates.
CREDAI says, Similar to the issues at hand even the solution to these issues is multipronged. One way of addressing this issue could be to permit escalation of prices by allowing a clause in the buyer seller agreement. Government may also consider either allowing Input Tax Credit for real estate projects and / or rationalisation of GST on various construction raw materials from their current rates as this would have a bring down the prices of residential properties immediately.
If these steps are not taken immediately, property prices across all segments will shoot-up directly hampering the affordable housing & housing for all missions of the Government. Homebuyers will have to invest more for their dream house and this would negate the savings arising out of all time low housing loan interest rates.