Mumbai: Raw material price hike brings construction sector to its knees

The rise in prices of steel bars, cement among other essential raw materials has largely affected the construction sector. Also<, the prices for plastics, man-made polymers and resins, used in everything from piping to insulation have been rising rapidly over the past few months, says developers. The pandemic-induced spike in prices of essential raw materials and the shortage of supply with traders have emerged as a bigger challenge for the developers across the markets.

Ashok Mohanani, president, NAREDCO Maharashtra said, "We have made an appeal to the Central Government to bring the iron and cement prices under control. In the last three months, the iron prices have increased by Rs 20,000 per ton, which is almost a 50% increase. Apart from this, copper and aluminium prices have also increased. At the time when the real estate industry is already feeling the pressure of the second wave and the lockdown restrictions, the rise in the raw material prices will put brakes on the recovery of the real estate sector."

In fact, many housing projects, which were resumed after the first wave of the pandemic, are likely to slow down again owing to this new raw materials crisis. Bhushan Nemlekar, Director, Sumit Woods Limited said, "The developer fraternity has been demanding a reduction in prices of the raw materials since the last few years. However, the Government has not yet taken the demand seriously. This can have an impact on affordable housing projects. Also, the shortage and the hike in the prices of raw materials will not only impact the construction cost but will also increase the lead time as well."

Similarly, Jayesh Rathod, Executive Director, The Guardians Real Estate Advisory stated, "The rise in raw material prices over the past few months has made cement and iron dearer. This is due to a combination of factors including unprecedented demand, multiple acts of force majeure, and the inevitable interruption of supply chains caused by the Covid-19 pandemic. Once the lockdown restrictions are lifted, we might notice a gradual rise in the property prices in the coming months where the change in percentage may vary as per different markets. In some parts of the country, we may witness minor hikes in the property prices by the end of the next quarter whereas we may see more significant corrections in the price by the end of 2021. All of this will be contingent on the successful stabilization of the ongoing healthcare crisis in the country by the relevant authorities."

The real estate stakeholders are in constant touch with the government, suggesting ways which can enable the industry to improve. Experts opine that the government should offer some special booster package besides incentives on stamp duty, premium payments to help the industry.

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