The cost of construction has increased by 35-40% due to a steep rise in the prices of raw materials such as cement, steel and sand in Andhra Pradesh.
Builders are worried about their prospects as they would have to shoulder an additional ₹5 lakh to ₹10 lakh per unit if the cost escalation were to be borne by them in view of the Real Estate (Regulation and Development) Act, 2016 (RERA) rules.
According to information, the cost of steel has gone up from ₹46,000-₹48,000 per tonne to ₹69,000-₹72,000 per tonne.
“Sand is not available for less than ₹1,100 per tonne. Similarly, the cost of cement too has shot up. Cement used to cost ₹280 to ₹300 per bag depending upon the quality and brand. Now, it costs ₹400 to ₹450 per bag. The costs of other fixtures such as electricity, plumbing and tiles have also increased. As a result, the cost per square foot (sft) has gone up to ₹4,500 to ₹5,500. It was about ₹3,500 per sft a few months ago,” sources in the construction industry say.
When contacted, the Confederation of Real Estate Developers Associations of India (CREDAI) Convener (Public Relations and Media Affairs Committee) R.V. Swamy says that the cost of construction of a unit has gone up by about 40%. Earlier, a flat used to cost ₹40 lakh depending on factors such as square feet and location. Now, the builder has to sell a flat at ₹45 lakh to ₹50 lakh if the rise in prices of raw materials were to be taken into account, he explains.
As the builders have already entered into an agreement with the buyers under the Real Estate (Regulation and Development) Act (RERA), they are clueless as to what to do. For new projects, the increase in prices can be passed on to the buyers but it may not be possible for already existing agreements under the RERA. The construction sector was already hit by the pandemic and related restrictions. The industry is now facing a blow with the steep rise in cost of materials. The government has to take proactive steps to resolve the issue, he says.
As per the industry sources, there are 8,000 to 10,000 ongoing projects across the State. In Vijayawada and Visakhapatnam, about 1,200 to 1,400 projects each are under progress. The rest are in cities and towns such as Guntur, Tirupati, Kurnool, Rajamahendravaram and Kakinada. The space of a flat ranges from 800ft to 1,000ft, 2,000ft and 3,000ft. In all, 2,500 to 3,000 builders are likely to be affected, according to sources.