KOCHI: The Covid-induced spike in prices of construction materials has severely affected the real estate sector. Many builders and architects observe that expenses have surged about 30% over the last few months. TNIE looks into the factors that resulted in the hike and how it is going to impact the pricing of flats and apartments
Although the government has brought in a spree of relaxations to boost the economy following a crippling lockdown, many sectors continue to remain in crisis. Considered one of the few sectors with a high job-generating potential, construction and real estate have been deeply affected by the rapid surge in the prices of materials like iron, steel, PVC pipes and cement.
With the Covid-induced lockdown resulting in the closure of several factories, the production of construction materials has taken a nosedive. In addition, restrictions on the import of materials from China has also resulted in the imminent price hike. “There is a considerable decrease in the import of steel from China. The spike in price of iron ore has also influenced the pricing of steel. Currently most of the steel is brought from states like Tamil Nadu, Chhattisgarh and Andhra Pradesh,” said a builder who does not want to be named.
Although the migrant workers have started returning to the state, many builders point out that the dearth of skilled labourers is ailing the sector. “Many of our counterparts are plying luxury buses or booking flights tickets to bring back skilled labourers. Most of us are forced to hire workers on increased wage to complete projects on time as a majority of them are not ready to work for the rates agreed upon pre-lockdown,” said Antony Kunnel, secretary-general, Credai Kerala.
Furthermore, the ongoing restrictions on quarries is causing the unavailability of gravel. “Local-level issues are hindering seamless availability of materials. The situation is being cashed in on by certain quarry owners who are selling at a higher price. Although the government has promised several relaxations for the sector, many issues still remain to be addressed. If things don’t improve, the sector may come to a standstill soon,” said another builder.
Not just high-end firms but even the ordinary citizens in the process of building homes are also struggling to make ends meet amid the price hike. “Our completed projects have no takers. It could take at least three to five months for the situation to improve. While a tonne of steel cost Rs 52,000 in January 2020, the price has increased to Rs 72,000, which means an increase of 35.8 per cent. In the case of cement, a 50-kg sack used to be available at Rs 340. It has now shot up to Rs 425, a 21 per cent hike.
Similarly, a 30 per cent increase is evident with iron, PVC, plumbing materials, paint, quarry materials, etc,” said Shyam Sundar, a Kochi-based architect.
30% increase in expenses
Stakeholders observe that the hike in material prices has increased the construction expenses up by 30 per cent. “Although many current projects have witnessed a huge gap between the estimate and current expenses, clients are not willing to take heed of our issues. We are forced to either bear the loss or miss out on the project to competitors,” said Ranjitmon K R, an engineer. According to industry experts, many builders are not taking up any new projects. “Currently, the priority is to complete existing work without further delay. If we analyse the ongoing market rates, it isn’t feasible to build affordable apartment projects,” he said.
Price hike for flats
Consequently, many are hinting at an imminent increase in prices of apartments. “With the spike in steel price alone, the cost has increased by Rs 100 per square foot of constructed area. It goes above Rs 1,000 per square metre. This will lead to a 30-60 per cent hike in rates of apartments. The price rise is inevitable,” said Kunnel.
A CRUMBLING SECTOR?
With the Covid-induced lockdown resulting in the closure of several factories, the production of construction materials has taken a nosedive. In addition, restrictions on the import of materials from China has resulted in the imminent price hike. Many builders also point out that the dearth of skilled labourers even as the ones available demand increased wages. Furthermore, the ongoing restrictions on quarries are causing the unavailability of gravel.