NEW DELHI: Cement manufacturers based in the South lashed out on Wednesday at what they claimed were attempts by builders to mislead the government in an effort to protect exorbitant margins. This comes in the wake of recent statements from builders’ lobbies and Union road transport minister Nitin Gadkari accusing cement companies of indulging in cartelisation to jack-up prices. The real estate industry has also sought a regulator for the cement industry.
Refuting these claims, the newly-formed South India Cement Manufacturers Association (SICMA) said in a letter to Prime Minister Narendra Modi that there was instead an urgent need for proactive measures to curb undue profiteering persisting in the real estate industry. SICMA president N Srinivasan said that builders have been using every excuse to blame cement makers for manipulating prices even as the cement industry was the “least cause contribution” to high realty prices.
“There is a clear cartel among builders under the banner of CREDAI (The Confederation of Real Estate Developers’ Association of India) and BAI (The Builders Association of India) who are holding on to prices despite having a margin of more than 100 per cent. We urge the government to ask each builder to come out clean on costing,” said Srinivasan, who is also the vice-chairman and MD, India Cements.
According to Srinivasan, just half a bag of cement is needed to construct one sq ft of building space and that cement accounts for just 1.5-2 per cent of the selling price of a house. “Given an FSI of 2/2.4, the cost of land in a flat would be around Rs 4,200 a sq.ft. With construction cost of Rs 2,000-2,500, the total flat price would work out to a maximum of Rs 6,700 per sq ft. However, the selling price of a house ranges from Rs 15,000-20,000 a sq.ft,” SICMA said.
Even if the price of cement were increased by Rs 100 per bag, it would mean just an additional cost of just Rs 50, SICMA said, adding that whenever questioned, “they, (builders), as a strategy raise the bogey of rising input costs, particularly cement”. Srinivasan also observed that the retail price of cement was much lower than the invoice price due to the wide range of choices available in the market and because builders get cement at discounted prices.