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Builders need to innovate, realign to beat rising cost of construction materials: Experts
Several building materials crucial for construction such as steel, cement, resin, PVC pipes and cables, have all seen a spike in prices by a whopping 30% to 50% in the past few months, which will have a direct impact on the real estate industry.
Bengaluru: Several building materials crucial for construction such as steel, cement, resin, PVC pipes and cables, have all seen a spike in prices by a whopping 30% to 50% in the past few months, which will have a direct impact on the real estate industry.
The price of cement has gone up by around Rs 350 per bag, which is nearly 30% and steel has gone up by Rs. 63,000 per tonne (50%); the cost of PVC pipes and electrical cables too have gone up by around 15%.
"The steel prices are going up because of a steep increase in the prices of iron ore, resulting in drastic increase in raw material prices and this is a global phenomenon because of high demand from China, US, Europe, and India.
Whereas cement prices are going up because of the government's extensive focus on infrastructure building which has resulted in a shortage of cement in the country," avers Dr Prashanth Reddy, Managing Director, Fundermax India, leader in architectural products for interior & exterior applications.
"Covid-19 pandemic and inflation have come as a double whammy for the building materials industry in India. The price increase of building materials has been felt across the value chain due to rising input costs like freight and fuel. These are the cascading effects which will be felt for another few quarters well into 2022," feels Monnanda Appaiah, Managing Director, Wienerberger India, a leading manufacturer of clay building materials solutions for walls, roofs, and façades.
Impact on real estate industry
An increase in essential input material, like steel and cement, will directly have a bearing on the cost of development. Rising input costs directly increase cost of construction in all verticals of real estate such as residential, commercial, industrial warehousing etc.
"Input costs increase cannot be absorbed infinitely by developers and will result in some price increase to residential customers which will have the domino effect of delaying /postponing demand fulfilment - a concern for the entire economy. Input cost increase in warehousing & industrial infrastructure will decrease project yields, stress developer financials and will be accompanied with some lag in increased rental cycles. Overall, a longer timeframe unless lease rentals move in sync with such input costs, the entire sector will see slower growth trends," says Monica Matthias, Director, Hoysala Projects.
"This increased cost will be passed on to the end customer thereby increasing the cost of a home. The government and Cement Corporation of India (CCI) must intervene to set a price ceiling to avoid cartelization and exploitation of demand," concurs C N Govindaraju, Chairman & Managing Director, Vaishnavi Group.
Need to innovate, realign: As a result of the rising input costs, builders will have to look at innovating and realigning by using alternate means of construction, feel industry experts.
"A combination of investment into building systems to achieve operational efficiencies and digitization would play a vital role. Technologies like pre - fabrication, innovative masonry tools and systems like Porotherm Dryfix to reduce wastage and address labour shortages can help builders achieve supply chain resilience and minimize risk," suggests Appaiah.