In an another communication, seeking urgent government intervention, the real estate developers body CREDAI on Friday has written to Prime Minister Narendra Modi requesting government to step in to curb spiraling steel and cement prices.
According to CREDAI, "The continuous upsurge in raw material prices will increase the project cost and will have a cascading effect on homebuyers."
The move comes just a few days after the Competition Commission of India (CCI) carrying out search action against cement majors across India, on alleged price cartelisation.
Apart from the Prime Minister, the letter has also been sent to minister for heavy industries Prakash Javadekar, finance and corporate Affairs minister Nirmala Sitharaman, Urban development minister Hardeep Puri and steel minister Dharmendra Pradhan.
"CREDAI has written to Prime Minister and all concerned ministries and urged them to take note of cartelisation by cement and steel manufacturers. CREDAI also requested the government for an immediate intervention in regulating the prices of construction raw materials amidst the ongoing pandemic as Indian real estate is one of the worst-hit sectors due to the COVID-19 pandemic. It is obvious that the steel companies are acting in concert to increase the prices. There is absolutely no rationale for a price increase of this magnitude in a pandemic ravaged economy. It is unfortunate that they are colluding to profiteer at this time," said Pankaj Bajaj, president of CREDAI NCR.
"Ultimately, the cost of this is to be borne by the home buyers and other end users. This will stall the nascent recovery in the market that we so desperately need. Not only have we asked the Prime Minister’s Office to intervene, we shall also be writing to CCI to take cognisance of this cartel just as we did against the cement companies," Bajaj said.
With a continuous and sudden upsurge due to cartelisation in the prices of steel, cement and other raw materials, real estate developers are experiencing an inevitable increase in construction cost and are faced with situation that will create a delay in delivery, stalling of projects in some cases, thereby impacting the homebuyers at large. Builders are facing an uphill task of further convincing the customers of this additional burden, said a statement issued by CREDAI.
High prices of cement and steel have been a serious concern and many industry leaders and ministers have expressed their concern on many public platforms too. Minister of state for road transport and highways, VK Singh warned cement companies against cartelisation at an industry event in September 2020. Minister for MSMEs and road transport and highway Nitin Gadkari had also cautioned steel and cement manufacturers for the irrational upsurge in prices and has raised this issue even with the Prime Minister.
Pandemic struck real estate industry has been hit the most with exponential increase in prices of raw materials.
"The real estate sector has been working on wafer thin margins and is battling unsold inventory on one hand and unfinished projects due to lack of funds on the other. With a stagnant demand, developers have not increased the prices and are selling projects at affordable rates," said Jaxay Shah, chairman of CREDAI.
"Indian real estate sector plays an important role in strengthening the economy. Besides employing more than 40 million workers the sector also is a key partner in many central government schemes like affordable housing, housing for all by 2022 and supports more than 250 ancillary industries. But the sector feels ignored because of lack of support from the government on various issues. There is an urgent need to control the spiraling cement, steel & other raw material prices and I urge the government to take necessary steps at the earliest," Shah said.
According to CREDAI, cement prices have increased by more than 23 percent and the steel prices have increased by more than 45 percent since the beginning of this year. In January 2020, cement price (50 kg bag) was around Rs 349 per bag and has now increased to Rs 420–430 per bag in December 2020, says CREDAI data mentioned in the letter.
Similarly, the steel manufacturers too have been taking undue advantage of the increase in demand for steel and have been increasing the prices every month. At the beginning of this year, the per tonne rate of steel was Rs 40, 000 and has now rocketed to Rs 58,000 in December 2020.
The continuous price hike is a classic case of cartelisation by cement and steel manufacturers. The increase in price of steel not only affects the real estate sector but has been affecting other sectors, claimed CREDAI.
Hurt by the spiraling price hikes of construction raw materials, Satish Magar, president of CREDAI said, "Like all sectors the real estate sector too has come out of near zero business in the first 2 quarters and was hopeful of revival during the festive season. High raw material costs make projects financially unviable and are causing distress amongst developers. I humbly, request the government to do the necessary and arrest the price hike of cement, steel."
CREDAI has appealed to the government that any increase in raw material cost will lead to increase in the construction costs and overall project cost. As a result, many developers will be forced to halt construction work, there by impacting the delivery of the projects and so on. This will have a cascading effect on the homebuyers also.
This abrupt increase in the prices is highly unethical and amounts to unfair and restrictive trade practices. Real estate sector had already been facing headwinds owing to stalled construction due to COVID-19 for most part of the year. Now the continuous and unchecked surge in the basic raw materials has created a deadlock and added to the uncertainties amongst the developer fraternity.
(Edited by : Jomy)