Real Estate

Looking for alternatives: rising material costs impact housing industry

If you have kept track of the industry’s performance in the last year or have undertaken a construction project, you would have dealt with the sharp rise in raw material costs. As per a January 2018 report by The Confederation of Real Estate Developers Association of India’s (CREDAI) Chennai chapter, the cost of sand, which was ₹35 cu.ft, in July 2017, saw a sharp increase of 75% and stood at ₹135 per cu.ft. Similarly, cement, earlier priced at ₹270 per bag, now costs ₹330 per bag: a 25% increase in six months. Steel has risen by 32% from ₹35,000 per tonne to ₹47,500 per tonne. Combining all this, the overall cost of construction has gone up by about ₹4,300 per sq.ft.

While a lot has been written about the ongoing sand crisis in Tamil Nadu and its corresponding effect on sand prices, not much is known about why costs of cement, steel, aluminium, etc., are also on the rise. The primary reasons include: increase in costs of transportation, electricity, labour, raw material and lending rates. On reason for the sharp rise in cement prices is the government’s allocation of a large chunk of the budget for highways and other infrastructure projects, says T. Chitty Babu, Chairman & CEO, Akshaya. Chennai has also suffered from a shortage of raw material, especially sand, which has added to the price escalation. “The implementation of GST has also affected prices. This will soon lead to more expensive homes in the city,” says Chitty Babu.

High demand, low supply

How are developers tackling the issue? When it comes to sand, alternatives like M-Sand are being used. But now, due to high demand and poor production capacity, the price of M-Sand too is rising. “The quality is sub-standard too. Today, people are opting for M-plaster, gypsum plaster or cement used for plastering, instead of sand and M-Sand,” says N. Kalyanaraman, COO, Navin’s.

As for cement, the State government attempted to ease things in 2015 with the introduction of Amma Cement. At ₹190 a kilo, it was targetted at low and middle-income groups. A customer can buy a maximum of 750 bags at 50 bags per 100 sq. ft. of construction. However, Amma Cement is available only to individual buyers in the LIG segment. A. Shankar, National Director, JLL India, says, “The scheme has helped customers, but the benefit is not completely transferred to the end-user. This may be due to lack of knowledge or pilferage. The godown manager holds the stock and releases it directly to the end-user.”

Materials like aluminium and electrical cables have also seen a substantial price hike. This has led to construction costs going up by almost ₹110 per sq.ft.

Looking for alternatives: rising material costs impact housing industry

The import solution

Developers have begun to look at importing certain products like high-end fit-outs and furniture, glass partitions, bathroom fittings, glazing, marble, monitor alarms and other machinery. They source this mostly from China, the U.S., UAE, Belgium, Italy, Malaysia and Thailand. Chennai-based group Navin’s imports prefab material from Malaysia and other countries. “Prices are on par with China, where different product ranges are available at varied cost brackets. We import prefab top flooring tiles,” explains Kalyanaraman. Despite such material being cheaper in other countries, the high import duty makes them expensive, says W.S. Habib, President, CREDAI Chennai. He explains that wood is imported from Malaysia and Africa, while finishing material comes from China.

Natural alternatives

To cope with the crisis and to make the industry more sustainable, it’s time builders looked at natural alternatives. Instead of bricks, many developers now use AAC blocks. The light-weight solid blocks help reduce steel consumption. Similarly, cost-effective and heat-reflecting white tiles, gypsum plaster, and blocks made of recycled construction debris are now in use, says Habib. Other alternatives include: fibre reinforced concrete, ferro-cement, timbercrete (sawdust+concrete) for blocks/bricks/pavers, and ferrock (steel dust converted into a concrete-like building material).

Energy-efficient and fire-resistant bamboo mat corrugated sheets can be used for roofing and rice hush ash concrete can improve the strength and durability of structures. The bagasse particleboard is a core material for laminated floors and can be used to manufacture low-cost building material.

Get smart

Even more than alternative material, builders have recently begun looking at alternative construction technologies and how they can be adapted in India.

Surabhi Arora, Senior Associate Director, Research, Colliers International India, says technologies like 5D BIM, virtual reality, climbing formworks, automated driverless trucks, excavators, cranes, aluminium wall forms, Mivan technology, pre-fabricated structures, and intelligent compaction are gradually emerging in the Indian market.

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Printable version | Jan 10, 2021 9:59:13 PM |

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