Expected rise in construction cost is in response to a sharp increase in steel prices
Prices of new properties and cost of construction are expected to surge by 15-20 per cent in Bengaluru over the next few months, says the Confederation of Real State Developers Association (CREDAI), Bengaluru.
This is in response to a sharp increase in the price of steel over the last few weeks. According to CREDAI and private developers in the city, this will lead to a considerable increase in the cost of construction in Bengaluru and other major cities in Karnataka.
Suresh Hari, chairman, CREDAI, Bengaluru, said: “The price of steel which is considered the backbone of the industry has reached Rs 85/kg. This is an increase of 50% compared to the last one and a half years. Moreover, while steel is the hardest hit, prices of other materials have also gone up gradually.”
Industry experts say that in any project, the steel component is 15 per cent of the overall cost of the project.
With a sharp increase in the steel price, the project cost will go up tremendously. “Steel prices started moving up around two to three weeks ago. There has been a continuous rise in the cost by Rs 2-3 per kg almost every day since then. While the cost was around Rs 65/kg a month ago, it has gone up to Rs 85-88/kg now. Just when the construction industry was starting to look up after the pandemic, the steel price has surged,” said MG Thimmaiah, CEO of a city-based construction company.
According to Hari, this surge is mostly due to the shortage in supply of raw materials and a spike in fuel prices. “In the next 3-6 months, a price increase of 15-20 per cent by the builders is inevitable. Construction cost for builders now has gone up by at least 20 per cent while the property prices have stayed put. The cost escalation this time around is very high. This is mostly due to the shortage in supply of raw materials and an increase in the fuel prices,” added Hari.
According to Pranav Sharma, founder-director, Swarna Griha, ultimately, the customers will feel the brunt as they will have to pay the cost.
There has been a continuous rise in the cost by Rs 2-3 per kg almost every day since steel prices increased – MG Thimmaiah, CEO, Bengaluru-based construction company
“This is going to impact all construction projects across segments, particularly affordable housing. If the input costs are so high, the affordability factor cannot be capped as we have to pass on the burden to the home buyer. As a builder, we can absorb some of the burdens, but the rest will have to be borne by the buyers. The government has to regulate the prices of the commodities and raw materials which go into construction, especially with regard to affordable housing,” said Sharma.
It is not just steel. Developers say that the cost of other construction materials such as cement and sand has gone up as well. “Other raw materials have also gone up by around 10-15 per cent. Procuring sand is yet another issue that the industry is facing. We don’t get quality sand anymore and importing it adds to the cost further. If the steel prices continue to surge at this rate, our cost will be affected by an additional 8 to 10 per cent,” added Hari.