Mumbai: Costlier real estate on the horizon as steel prices pinch city developers

Mumbai: Costlier real estate on the horizon as steel prices pinch city developers

Sweety AdimulamUpdated: Wednesday, March 30, 2022, 10:55 PM IST
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Mumbai: Costlier real estate on the horizon as steel prices pinch city developers | Unsplash

City developers, like their ilk across the country, are worried about the spiralling prices of raw material, especially steel and cement. They have been urging the government for immediate support and urgent decisions to cap the hike. They have said that otherwise they would be left with no other option but to pass on the cost to homebuyers.

Manju Yagnik, vice-chairperson of Nahar Group and senior vice-president of NAREDCO (Maharashtra) expressed concern over the pricing issue and said it has now gone beyond the control of developers. “Steel prices have shot to Rs 87,000 per tonne from Rs 55,000 per tonne. Cement price has jumped from Rs 200 to Rs 325. Overall, raw material prices have gone up by 30-40 per cent suddenly. Also post-Covid, the manpower /labour cost has also increased, not to mention fuel price hike which impacts transportation of materials. There is no other option but to increase the price of houses.”

Another leading developer, Dr Niranjan Hiranandani, vice-chairperson of NAREDCO and MD of the Hiranandani Group, raised concern over project viability due to the increasing costs. He said, “it is no longer a matter of reduced percentage; rather the situation is one where project viability is in question. Increased cost of raw materials has resulted in a cautious five per cent rise in price points of ongoing projects. New launches should see an 8-10 per cent rise.”

On the demand for ban of steel export, he said it is a double-edged sword: India needs exports; steel is also needed in larger quantities within India. “How to balance this is something we expect authorities to handle,” he said.

The leading real estate advisory firm The Guardians anticipates 15-20 per cent hike in property prices in Metro cities and 5-10 per cent price hike in non-Metro pockets in the next 30-45 days. Its chairman Kaushal Agarwal said, “Today, developers are operating on a thin margin and despite many challenges they have not increased the price as they don’t want to hurt the current positive sentiment. If this trend prolongs for even a week, they will be forced to pass on this burden to the end-users.”

According to Colliers India, the increasing cost of raw materials will have maximum impact on residential and industrial sectors. They explained that since residential projects in the affordable and mid-income segments carry relatively lower margins and are price sensitive, any major increase in input cost can put pressure on developers to pass it on to end-users.

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