Price hike in raw material to be the determining factor for hike in property prices



At a time when real estate sector was in recovery mode from last years’ onslaught of corona pandemic, the second wave has again thrown a spanner in the works for the industry. Compounding the problem manifold is the steep jump in prices of key raw materials like cement, iron and steel, etc. The increase in prices of these items has been as much as 75% in some cases as compared to the mid of last year. This rise in raw material prices will put the brakes on the recovery of the real estate sector when there is already a pressure of the second wave of the pandemic and the restrictions in states. This is going to be burdening for developers pushing them to reach their bottom line and also limit their capacity to come up with offers and discounts for the customers.

 

The strict lockdown imposed in the country last year resulted in various supply chain disruptions and bottlenecks. However, there has been only partial lockdown by various states in the country this year, thereby allowing movement of goods from one place to another. Yet the prices of construction raw materials are steadily inching upwards over the last couple of months.   

 

The prices of the raw materials have gone up in the country due to many domestic and international factors. The high prices are affecting the developers who are struggling not to pass on the increase to the customers. Additionally, developers also mentioned that they may be unable to reduce prices or offer promotions further due to the unprecedented raw material price increase, even though sentiments remain muted due to the pandemic. Rather, prices may only start going up in a few quarters if the COVID-19 crisis is controlled.

 

Mr. Pradeep Aggarwal, Founder & Chairman – Signature Global Group & Chairman – ASSOCHAM National Council on Real Estate, Housing and Urban Development says, “We had barely come out of the challenging times of last year and just when the industry started to breathe a sigh of relief, the prices of many raw materials has jumped drastically. This will limit our capacity to give discounts and offers to the home buyers, something that the current market scenario warrants. Part of the recovery seen last year after the lockdown was eased was due to the promotional offers by the developers. But this year may see freeze on such offers. Irrespective of this, since the home loan rates are at the lowest, this is the perfect time to buy own house.

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