Builders adopt wait & watch as costs hit the roof

VIJAYAWADA: Though building and construction activity looks like re-starting in the State with a dip in Covid cases, the concern over the possible third wave and the prohibitive cost of building material, labour and transportation is making several builders adopt a ‘wait and watch’ policy in case of new ventures. But, those who indulge in ongoing projects are searching options to minimise the losses. 

With relaxation of curfew hours last week, the construction activity resumed across the state, but it is yet to pick up pace. Workers are yet to come to the construction sites in a full-fledged manner and increased cost of the building materials like sand, cement, iron is pushing the builders into a dilemma, to start work or wait for some more time. 

“It is really a difficult situation for those in the real estate business. The construction cost has increased abnormally. Iron and steel, which used to be anywhere between Rs 40,000 - Rs 45,000 per tonne before the Covid pandemic, is now priced around Rs 65,000 per tonne. Similarly, the cost of sand and cement has increased.  The recent hike in diesel price has worsened our situation, as the price has a cascading effect on prices of every material used in the construction sector,” explained S Rajeswara Rao, an architect and builder from Vijayawada-Guntur region. 

Agreeing with his assessment, another architect Vivekananda Swamy said works in more than 50 per cent of the under-construction projects are yet to recommence, as the fear of possible third wave and its fallout is making the builders adopt a wait and watch policy. “Further, there have been no purchases in either apartments or gated communities in recent weeks, which stymied the fund flow in the building and construction sector,” he observed.

Non-availability of sand and its prohibitive cost is one important factor in escalation of the construction cost, observed another contractor. Earlier, dry sand used to be supplied at a reasonable cost and today, it is wet sand that is being supplied at a more cost, which is affecting the cost of the construction. Quantity of wet sand will decrease after being dried up.

According to market sources, a bag of cement now costs Rs 350 as against Rs 220 at the start of 2020 and the cost of copper (wiring and other fixtures) has increased by 60 per cent. As a whole, construction cost per square foot has increased by Rs 200.

Former Joint Secretary of CREDAI - AP Venkateswara Reddy observed that Covid pandemic saw NRI investment in the realty sector in the state go down, which will have a telling impact on the sector. It is a known fact that several of the NRIs purchase apartments and other properties as investment and now with them backing out due to the Covid crisis, the funds flow in the sector gets affected. 

A former builder observed that lack of construction activity by the government for development works is also not helping the sector. “Many in the field are keenly observing the developments and waiting for things to turn favourable,” he said.  It is not like there was no demand for housing in the past 18 months, there was during the gap between Covid first wave and the second wave. More so in Visakhapatnam, which is declared as the executive capital of the state. 

M Obul Reddy, CMD of Honeyy Group, said, “Everyone wanted to have their own house with the trend of working from home increasing rentals. First choice was affordable houses (upto Rs 3,000 per sqft). There was peak demand for affordable housing after the first wave between November-March,” he said. His own group has sold 85 affordable houses in two months in Bheemili when compared to 50 affordable houses in two years before that. 

“However, there was a drop in sales by March and today it is completely flat with no sales. The impact of the second wave is likely to continue for another year, as people are shying away from investing in housing and instead they are saving for emergency purposes, given the average medical bill footed during the second wave running into several lakhs,” he observed.  He hoped for the situation to turn for the better.