Builders, cement makers spar over price hike

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Real estate developers and cement producers in the State are yet again sparring over the increase in cement prices. Real estate developers warn that it would lead to an increase in apartment prices, while the cement industry attributed it to an increase in their input cost.

The rise in cement prices has been a politically sensitive topic and both parties have been engaged in a war of words over the issue in recent years.

Builders, cement makers spar over price hike

Developers have alleged cartelisation by the cement industry, a charge which has been denied by the other side. In turn, the cement manufacturers alleged that the developers should bring down their inflated apartment prices first. Builders claim the retail cement prices have increased by 13% from ₹460 in May to up to ₹520 per 50 kg bag in June.

“When it comes to construction there are two important ingredients — cement and steel. Prices of both have gone up in the last two months. Anyone undertaking a project now will have to spend additional money and because of this, apartment prices are likely to go up,” Suresh Krishn, Tamil Nadu president, The Confederation of Real Estate Developers Association of India (CREDAI), said.

According to an analyst at research firm Emkay, cement prices in Tamil Nadu have gone up by 3.4% at the compound annual growth rate (CAGR) over the past four years. It has increased around 20-22% in FY21 from FY20, and further up by 3-4% in the last 3-4 months.

Padam Dugar, vice-chairman and managing director of Dugar Housing Limited and president of CREDAI - Chennai Chapter, pointed out that there was a huge price difference between the cement sold in Tamil Nadu and neighbouring States like Andhra Pradesh.

“A ₹50 increase in the cement price will result in a ₹20 hike in cost per square feet. Taking into account the time and other inflationary factors, we need to ensure that the burden of increase in final real estate cost is equally shared by the developers and customers,” said Arun Mn, founder and managing director of Casagrand.

A senior cement industry executive said input costs had gone up, and to that extent there was an increase in price. He pointed out that petroleum coke (petcoke) prices, a key input for manufacturing cement, had gone up from $45 to to $130 per tonne, while diesel prices had gone up from ₹60 to ₹90 per litre, thereby resulting in increased freight cost.

Natasha Trikha, analyst, CARE Ratings, pointed out that the all-India wholesale and retail prices of cement had increased by 4.4% and 3.3% to ₹358 and ₹371 per 50 kg bag respectively on a yearly basis for the month of March. Further, it averaged at ₹370 (wholesale) and ₹378 (retail) per 50 kg bag for the period between April and May.

Mani Rangarajan, group COO,, and, said among the various components which go into apartment pricing, the land cost had the highest share.

But the steep rise in prices of raw materials, especially since March, would also have a bearing on the final price of properties, he added.

“They (State government) should call the manufacturers and the end users to discuss the issue,” Mr. Krishn said.

Recently, Industries Minister Thangam Thennarasu said the Chief Minister would be consulted on the issue and prices would be brought down.

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Printable version | Jul 26, 2021 12:04:27 AM |

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