Real estate developers are likely to get a breather as far as high cement prices are concerned, with the commerce ministry promising to look into allegations of a cartel operating in the cement manufacturing sector.
“We have received a series of complaints against the cement manufacturers. We will be certainly looking into the issue and will talk to the sector,” a senior official from the commerce ministry told this publication.
Real estate developers have been complaining about the existence of cement cartels for a long while, but what seems to have drawn the ministry’s attention is a recent representation made to Union Minister Nitin Gadkari by road developers after repeated cement price hikes were implemented.
“The cement manufacturers seem to be moving like a cartel,” Gadkari had said last week, adding that higher prices of cement are affecting the country’s highway construction projects.
The cost of a 50-kg bag of cement has increased from Rs 270 to Rs 400 over the last two months in the NCR region. Cement companies had gone for a price hike in April, March and February this year.
The housing and real estate sector is the largest consumer of cement, accounting for about 65 per cent of the total consumption in India. The other major consumers include public infrastructure (20 per cent) and industrial development (15 per cent).
Realty developers claim that the cement price hikes would adversely impact the affordable housing project and take away the benefits offered by GST rate cut. Developers also say that since cement is one of the key contributors to input costs, this would substantially increase their construction costs.
According to CREDAI, an increase of around 30 per cent in the cost of cement can increase the cost of building a unit of 500 square feet by up to Rs 1 lakh.
Price hikes also makes thing much more difficult for an under construction project.
“An increase in cost when the construction has already started and units sold makes it really difficult for the developer to contain the loss. The cost goes up to by 3 to 5 per cent in such cases and it becomes difficult to communicate the increase to the consumer,” Manoj Gaur, MD, Gaurs Group said.