Property cost to surge due to sharp rise in construction costs: CREDAI

The Confederation of Real Estate Developers' Association of India (CREDAI) has expressed concern over the continued surge in the cost of construction raw materials comprising cement and steel. Historically, costs of almost all materials and commodities surge whenever there is a steady rise in fuel cost but the costs of construction raw materials have been surging steadily since January last year. Additionally, the setbacks in construction due to lockdowns, curfews, shortage of labour resulted in rising labour prices leading to a direct jump in construction cost between approximately 10% to 15% in the past 18 months. Developers emphasise that this is a multifaceted problem since RERA does not allow the flexibility to increase the selling price even if the construction prices increase substantially. CREDAI wrote to several central government departments expressing concern over the steep increase in costs of materials and has been emphasising the problem on many platforms. If the costs of higher raw materials do not start reducing in the immediate future, there is a high probability that the costs of residential properties will increase by 10 -15% to balance the enhanced construction cost. President, CREDAI National, Harsh Vardhan Patodia, told the media that they have been consistently observing a sharp jump in the raw material costs over the past year and do not appear to be declining or stabilising soon. The developers may not be able to handle increasing costs and unfortunately may have passed on the burden onto homebuyers. CREDAI requests the government and relevant Ministries to look into this problem and handle the cost increase at the earliest. CREDAI says one method of addressing this issue could be to allow an increase in costs by enabling a clause in the buyer-seller contract. The government may additionally consider either enabling Input Tax Credit for real estate projects and/or rationalisation of GST on different construction raw materials from their present values as this would have decreased the costs of residential properties immediately. If these measures are not taken immediately, property values across all sectors will surge directly impeding affordable housing & housing for all missions of the government. Image Source