Construction sector heading for slowdown

Problems in raising money to fund various projects will affect the construction sector in 2013

Published: 12th January 2013 10:56 AM  |   Last Updated: 12th January 2013 10:56 AM   |  A+A-

According to estimates from various agencies, the construction sector in the country is going to witness a slowdown in 2013. This is due to  continuing challenges in order execution which have resulted in stretched  working capital of companies and problems in raising money to fund various projects.

The city of Kochi, which is the main centre of all construction activities in the state, will be no exception.

 It is estimated that the demand for cement will grow between five to eight per cent in India in 2013 but  Southern states face over-supply. Though this is the situation, the increase in price remains a major concern in the construction sector in the city.

“As a result of various factors, the cost of construction has increased by Rs 500 a square feet within a short span. The increase in cement and metal prices is more than 50 per cent in one year. Cement prices have reached Rs 360 per bag. Metal price has touched Rs 4,000 per load, an increase of 50 per cent. The labour cost is also high in Kerala. When compared to other states Kerala has the highest cost of construction in the entire country,” said

A C Joseph, director, A C City Builders and Developers.The cement production volume in 2012 was mainly driven by a relatively robust activity in housing and commercial real estate segment.

 From September 2010 to March 2012, the average growth in credit to the housing sector was around 15 per cent and around 16 per cent in commercial real estate segment.

The cement price have increased by Rs 50 per bag in a short period of time. In November last year, cement dealers have staged a strike demanding that  double taxation in this segment should be avoided. The dealers are awaiting a response in their favour from the state government.

Quashing the possibility of an increase in cement prices in the near future, M R Francis, state president, Cement Dealers Association said that in all likelihood the prices may ease.

“Cement prices have increased from Rs 310 to Rs 360 per bag on an year-on-year basis. The increase is only 16.13 per cent. Due to sufficient supply the prices may reduce,” he added.

But players in the real estate sector feel that cement prices will increase by at least 5-10 per cent in the near future.


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