Following the warning from Maharashtra’s Credai chapter to halt construction due to rising commodity prices, Delhi-NCR developers opted to do the same. “The unexpected and rapid rise in costs has eaten into the thin margins of real estate projects, rendering them unviable.” “Proponents have decided to postpone hardware purchases, anticipating that rising costs could stall projects,” Credai-NCR said in a statement. Mumbai and Pune developers recently made a similar statement. According to CREDAI NCR, an industry association that represents property developers, input costs have risen by a weighted average of 30-40% recently, while prices for a few properties have increased by more than 50%.
Claiming that commodity prices have risen by almost 40-45%, Credai Maharashtra also said it had no choice but to temporarily halt commodity purchases and shut down construction works. . “Prices for steel, cement and other construction materials have steadily increased over the past two years. These have now skyrocketed to a level beyond the affordability of many developers, especially in Tier 2/3 cities. As many as 61 members of municipal associations that are part of Credai Maharashtra have had no choice but to temporarily halt purchases and shut down construction activities,” said Sunil Furde, Chairman of Credai Maharashtra. Furde said the rates of steel, cement, bricks, sand and washing sand, electrical wires, fittings, tiles, pipes, sanitary ware, manufacturing, sand, minerals secondary and others, have increased by around 40-45% and that the present impact on input costs is around Rs 400-600 per square foot.
“Costs of key raw materials such as steel and cement used in construction have increased due to disruptions in the global supply chain. Post-COVID-19, the current crisis is dealing a double blow to real estate developers as they find it extremely difficult to deliver projects within the expected time and cost. For steel in particular, the situation is so bad that suppliers are unwilling to accept orders even at high prices,” said Pankaj Bajaj, President of CREDAI-NCR. According to the industry body, the recent construction cost impact is around Rs 500 per square foot or more, which will result in higher prices for home buyers for fresh sales. “Steel suppliers are even canceling contractual supplies citing force majeure and the war in Ukraine. However, builders, while free to raise prices on unsold inventory, are locked in where they pre-sold the inventory. Perhaps this situation should be recognized as force majeure and prices should be increased even for the stocks sold. Otherwise, we are looking at the next wave of stalled and unviable projects,” he said.
In order to draw the government’s attention to the matter, all members of Credai Maharashtra are considering stopping work. Subsequently, they also requested the Chairman of the Real Estate Regulatory Authority of Maharashtra, Ajoy Mehta, by letter, to extend the latest completion date of the projects by at least six months so that the developers have time to hold out until prices rationalize. Home buyers are against builders’ decision to halt work in Maharashtra. “How can they stop construction when they have started projects and taken the reservation amount and subsequent EMIs for the projects. Price escalation cannot be a force majeure situation since raw materials are available in abundance,” said Abhay Upadhyay, Chairman, Forum for People’s Collective Efforts and Central Advisory Board Member, RERA, MoHUA. Even then, they did not complete their projects as evidenced by thousands of incomplete and ongoing projects across India, he said.
Summary of news:
- Following in the footsteps of developers in Maharashtra, real estate agents in the Delhi-NCR area have threatened to halt construction due to rising raw material costs.
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