Steel, cement costs jumps up by 35% over last two months

The costs of basic construction materials – steel and cement – have increased by 35% over the last two months, hurting the profit margins of developers.

While steel costs have reached Rs 80,500 per tonne, cement prices are Rs 430 per bag, adding to the construction cost in the ongoing projects.

As per the developers, increasing raw material costs are not only impacting construction and procurement but are additionally likely to impact the demand for new projects. Steel costs hovered about Rs 60,000 per tonne in December-end whereas cement prices were Rs 325 per bag around the same period.

Tejas Joshi, president, Confederation of Real Estate Developers' Associations of India (Credai) Ahmedabad, told the media that steel and cement account for an estimated 30% of the production cost in real-estate projects. Projects which are underway will be adversely influenced because of the abrupt increase in raw material costs. It will impact the revenues of real-estate developers as they will not be able to pass on costs to consumers as costs for existing projects are fixed in advance.

Increasing steel and cement costs have additionally been the bane of construction contractors. Gujarat Contractors’ Association (GCA) has a long-pending demand with the government — revision of project costs following increasing costs.

Even developers are considering holding discussions with the state government and Gujarat Real Estate Regulatory Authority (RERA) to allow builders to modify and renegotiate project prices, as per Jaxay Shah, chairman, Assocham Western Region and a developer based in Ahmedabad.

In 2020, the average price of steel was about Rs 35,000. It implies, over the last couple of years, costs have more than doubled, adding to product prices. Developers foresee that surging costs of steel and cement will impact affordable housing projects as property costs are set to increase.

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