Affordable housing projects stagnate as construction costs weigh on real estate agents

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Affordable housing projects (and those priced below ₹75 lakh) are said to have hit the slow lane in India, with developers holding back launches given rising construction costs. The delay in the realization of existing projects cannot be ruled out either. The impact or increase in cost per square foot is around ₹500-800 for those realtors who play on low margin volumes.

Interestingly, some developers in Mumbai, Pune and Delh-NCR area had threatened to halt construction activities until there was some control over material costs. In November, the Haryana government increased affordable housing rates by ₹200 per square foot. The increase came after almost seven years.

According to Pratik Jain, Founder and CEO, The Stallions – a sales and marketing company for developers – said rising costs have “certainly slowed down” project launches and “affected developers”. “While this has yet to impact demand, buyers will be affected if developers raise the selling price,” he said. Activity area.

Rising cost of materials

Realtors say there has been a price increase of at least 5-10% for items like steel, cement, fillers, aluminum, copper, paints, etc. CREDAI, the supreme agency of the real estate agent, sets an increase in construction costs of 10 to 15%. By December 2022, the increase in the cost of construction could reach an additional 8-10%, depending on current trends. Inflation measured by the wholesale price index and the cost of building materials is increasing at a double-digit rate.

CREDAI said the price of steel rose 40-45% and that of cement 35-40%, year-on-year (yoy). Three-month price trends show that steel prices rose from ₹51,000 per ton to ₹70,000 per ton, while cement cost for the period rose from ₹285 per bag to ₹310 per bag.

Rishab Siroya, President-elect, NAREDCO, NextGen, said the sharp increase in material costs has affected the viability of affordable housing projects, where the construction cost is 30-40% of the project component.

“Until there is stability (in the cost of building materials), developers want to slow down new launches. They are unable to determine the cost he can bear without passing it on to the customer,” he said.

Home costs (to the buyer) are up 4-5% year-on-year, trade sources say. On a quarterly (qoq) basis, they are up 1-3%.

Impact on buyer sentiment

ANAROCK Group Chairman Anuj Puri said rising house prices “will impact demand” and consumer surveys suggest that “at least 56% of respondents are bracing for higher prices.” prices in 2022″, but a price increase of more than 10% “will have a significant impact on residential sales”.

“Yes, construction is affected due to the rising cost of materials. Many smaller developers may not be able to absorb rising input costs at present and therefore may be forced to halt construction at sites,” he added. According to ANAROCK Research, nearly 3.85 lakh housing units are expected to be completed in 2022.

Published on

April 24, 2022

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