Soaring prices worsen construction sec woes

| | New Delhi
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Soaring prices worsen construction sec woes

Friday, 04 June 2021 | Rajesh Kumar | New Delhi

Soaring prices worsen construction sec woes

Cement, steel, bricks, wood, sand’s prices see huge rise

The construction activities have been hit due to lockdown and shortage of labourers, but the spiraling prices of raw materials have come as double whammy.

The price of cement, steel, bricks, wood, sand, coarse aggregates/construction gravel and other building materials have gone up by 50-100 per cent.

On Thursday, leading domestic steelmakers hiked the prices of Hot Rolled Coil (HRC) and Cold Rolled Coil (CRC) by up to Rs 4,000 and Rs 4,900 per tonne, respectively which will impact the construction sector.  Many housing projects, which were resumed after the first wave of the pandemic, are likely to come to a standstill again owing to the new crisis.

A bag of cement is presently available between Rs 350-450 per bag (50 kg) depending on the quality in most parts of the country. The same was Rs 300-325 in May last year. This translates into a massive hike of about 25 to 35 per cent in the last one year. Prices in Andhra Pradesh, Karnataka, Tamil Nadu and Kerala increase by Rs 50-75 per bag. In Delhi, cement prices also witnessed an increase of Rs 50-75 per bag in the past few months. The production cost of cement has seen an adverse impact due to the increased cost of power and fuel and freight cost.

Prices of steel increased up to 75 per cent in the last one year. Steel prices are up by Rs 10,000 a tonne in the last three weeks. If construction of an independent house consumes eight tonnes steel, the customer will now face escalation of Rs 80,000 in the building cost.

Similarly, prices of all PVC items are up by 10 percent or more. TMT rod or saria which was about Rs 40 a kg a year ago, is now available at Rs 65 to Rs 70 a kg.

Prices of bricks also increased from Rs 5 to Rs 8 per brick. River sand cost has also increased from Rs 15-20 per feet to Rs 25-30 per feet. The cost of sand truck, which was earlier Rs 2400, is now increased to Rs 3700.

Raj Kumar Garg of Gagan Raj builders said prices of some of the essential raw materials were increased by manufacturers citing the high transportation cost in the wake of Covid-19 related regulations. Steel prices depend on international markets while the cement prices increased due to cost of productions increased due to various factors.

He said rising cost of construction materials may hit the sector further and also impact the properties prices across India in view of disruption in supply chains and bottlenecks as there is short supply of building raw materials due to lockdown and curbs. 

Leading dealers in Delhi also point out that the situation was almost the same during the first wave of the pandemic.

The Indian construction industry is the second largest employer after agriculture, having an industry size of Rs 10.5 trillion. As per CREDAI, there were 20,000 ongoing construction projects across 18,000 sites before the lockdown in 2020.

These involved a workforce of over eight million. Of this, almost 30 per cent of the workers left for their native places in the initial days of the lockdown, hence putting a brake on the construction activities that took a while to resume.

According to the Construction Cost Guidebook India published by JLL, the cost of construction of greenfield and interior fit-out projects have gone up by 5-6 per cent due to Covid-19. The pandemic led to a halt in construction activities and abrupt closure of certain construction sites and interruption in supply chains.

The rise in cost can be attributed to the procurement challenges faced by the vendors as they may have to procure from the first available source at a higher price.

Also, the increased cost towards health and safety (setting up of quarantine facility, sanitation, thermal scanners and like), and skilled labour availability may have attributed to the increase in the cost of construction.

Material and transportation costs have also spiked due to demand and non-availability and transportation challenges.

According to the report, the average cost of construction for a luxury residential apartment in a high-rise building in Mumbai is Rs 5,625 per square feet. The cost of construction in Mumbai is on average 10 per cent higher than all other cities, across asset classes.

The cost of construction in Delhi and Pune, would be Rs 4,950 per square feet and Rs 4,905 per square feet respectively.

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