Ashutosh T., a techie, started building his dream home in December 2021 and is yet to complete the project. But in the intervening period, he has overshot his budget by over 40% due to inflation in construction materials.
“I have seen the rally in the prices of construction materials throughout the past six months. From the Russia-Ukraine war, coal shortage to fuel prices, everything has been blamed. To add insult to injury, even my EMIs have gone up, given that after four years, the Reserve Bank of India hiked repo rates in the first week of May,” he lamented.
This has been the experience of most homebuyers over the last six months. Even in the apartment sector, many builders are reportedly demanding an addition in the range of ₹100 to ₹200 per sq. ft. citing inflation.
“There have been complaints in the Real Estate Regulatory Authority (RERA) against builders for violating agreements and demanding more money than previously agreed upon. But builders usually account for inflation in the agreements already,” said M.S. Shankar, general secretary, Forum for People’s Collective Efforts, fighting for homebuyers.
Suresh Hari, chairman, Confederation of Real Estate Developers’ Association of India (CREDAI)-Bengaluru, said, on an average, inflation in construction materials and the labour market had effectively increased the input costs in the sector by around 30 to 40%.
“In most new projects, there has been a cost escalation of at least 10%, with builders absorbing the remainder of the escalation. There has been a lot of stress on ongoing projects. Some builders are asking for an additional cost due to inflation, but homebuyers are unlikely to pay that due to contracts drawn up before,” he said, adding the reduction in guidance value by the government had provided the sector some relief.
The last five months have seen a rally in most of the construction materials — cement, steel, sand, and bricks — in the range of 13 to 63%.
“The Russia-Ukraine war has reportedly disrupted supply of some raw materials to the cement industry. Coal shortage in the country and inflation in its prices has also adversely impacted cement and brick industries, for which coal is a prerequisite. There is also cartelisation jacking up cement prices. A 50-kilo bag that cost ₹340 in December-January, had shot up to ₹480 in March and again saw a correction to ₹430 now. A single piece of table-mounted brick has shot up from ₹7 to ₹10,” said Khaleed Rehman, an architect with Centre for Vernacular Architecture.
Another material to see a steep increase in prices is steel. The cost of a tonne has shot up from ₹55,000 to ₹90,000.
“There is a serious lack of availability of skilled labour in the market, which has also shot up costs,” Mr. Hari. “Many migrant labourers, who returned to their hometowns during the pandemic, haven’t returned in full force yet, creating a shortage here. This has pushed the contractors to offer more wages to lure them, but even then there is a shortage. Easily there is a 15 to 20% inflation in labour wages in the market,” Mr. Rehman said.
CREDAI has now demanded government intervention to regulate the prices of construction materials.
“The industry is picking up pace and volumes slowly over the last few months, but is marred by inflation. There is a need for the government to intervene and regulate prices or at least the misuse of circumstances by the industry artificially hiking prices,” Mr. Hari said.