Property prices to hike 10-15% as input costs go up

Hyderabad: The steep and unprecedented increase in price for input materials like steel, aluminum and cement has given a severe jerk to the construction activity and is severely disrupting the project costs, impacting the cost of the projects and hampering the cash flows and working capital for the builders and developers. Various real estate bodies have come together to discuss on the steps to overcome this issue.

Due to the steep increase in the costs of raw materials for construction, more than 600 developers were affected, acting as a negative catalyst that will cause a drastic rise in home prices and impact the delivery to homebuyers. The industry representatives along with the real estate fraternity are collectively trying to find the way forward in these challenging times.

Confederation of Real Estate Developers' Associations of India (Credai) Hyderabad President P Ramakrishna Rao said, "The Russia-Ukraine conflict has severely impacted the supply chains globally, affecting the supply of raw materials and increasing their costs. The increase in costs for materials like steel, aluminium, copper and PVC pipes is extremely steep and is severely impacting our cash flows."

"The increased cost of diesel is further causing an inflationary impact on the costs of raw materials. The developers have tried to absorb the cost all this time to remain competitive, however with the current spike in prices of raw materials, we may need to consider stopping work on the projects till the prices cool down a little or continue work and pass the increased cost to the customers," he said.

Credai Hyderabad General Secretary V Rajashekar Reddy said, "The steel price, which was around Rs 40,000 - 45,000 per tonne last year, has touched Rs 85,000 to 90,000, aluminum prices increased by 45-50 per cent, and even cement prices are on an upward spiral. In this situation, the only option for a developer is to increase the property prices to accommodate the price hike."

"The overall increase in the raw material price and transportation cost will increase the cost to the developer by approximately 10-15 per cent which has to be passed on to the consumer," he said adding that all real estate developers in Telangana have decided to stop their ongoing construction work in the State for one day on April 4th as a protest against steep hike in raw material prices.

Telangana Real Estate Developers' Association (Treda) President Sunil Chandra Reddy said, "An increase in input costs, and shrinking margins, has only added to the woes of developers and hit the sector hard. The developers are left with no option but to increase the cost of the ongoing projects and the unsold inventory to disperse the impact of the rising prices."

C Prabhakar Rao, President, Telangana Builders Federation said, "The market prices have really gone up due to the increase in the prices of the materials used. The global environment has been a dampener for prospective customers. We urge the governments both in the State and the Centre to provide relief to the developers through GST and input credits and reduce stamp duties to boost customer sentiment."

G V Rao, President of Telangana Developers Association, said: "Due to the intense competition in the industry the developers operate on lean margins. When the input costs increase across the board, they have little leeway to absorb the same. The impact of such hike is across the board from affordable housing to luxury homes, however, the effective escalation would be higher on the affordable segment."