The real estate business which has been in the doldrums ever since the COVID-19 pandemic had hit the city in March 2020, has, for the first time, shown positive signs of improvement but the rise in the material cost has lowered profitability, according to experts.
The first wave was really bad for the sector as business dropped to almost zero level. “On the one hand we did not have buyers coming forward or banks extending loans and on the other construction work had stalled due to the lockdown and large-scale migration of labour,” recalls CREDAI chairman B. Srinivasa Rao. Things were about to look better from February this year but the COVID-19 second wave from March dealt another big blow, he adds.
The situation is now improving and if this trend continues then by the next couple of months business should bounce back to normalcy, opine experts.
Manmaya Pandab, DGM, State Bank of India, tells The Hindu that signs of improvement are evident and new areas such as Pendurthi, Lankelapalem, Atchutapuram and Madhurwada are picking up.
The SBI is financing close to 150 projects, including about 15 sanctioned post COVID-19 second wave, with project cost going up to ₹45 crore in some cases.
According to CREDAI president K.S.R.K. Raju the demand for gated communities has been on the rise. At least 50 gated communities, varying from mid-segment to high-end are coming up in the city. “Domestic customers as also NRIs are preferring gated communities as they provide all amenities and security,” adds Mr. Raju.
Shrinking profits
Despite the signs of improvement CREDAI officials say that profitability in the business is shrinking with every passing day due to the steep increase in material cost.
The cost of steel has gone up from ₹35,000 per tonne to ₹65,000 in the last few months while the cost of cement per bag has increased by ₹40 in the last two days. Non-availability of sand and the high fluctuation in its price are adding to their woes.
“But at the same time we have not been able to increase the selling price as desired,” says Mr. Srinivasa Rao.
According to Mr. Raju, there has been a 35-40% increase in the material cost.