The price of real estate in the Mumbai Metropolitan Region seems to be on an upbound with a sentiment of consensus amongst developers that price hike is not a choice any longer, but a necessity due to the rising input costs.
As per the Maharashtra Chamber of Housing Industry (MCHI) and the Confederation of Real Estate Developers’ Associations of India (CREDAI), despite goodmarket sentiment in all segments – be it residential, retail, or commercial – developers’ profit margins are dwindling owing to rising input costs.
As per MCHI data, the input cost has seen a sharp rise of around 40 per cent in the last one year. The prices of cement have gone up by 25 per cent, while steel prices have shot up by 60 per cent and conduit pipes and the copper price have increased 40 per cent.
The approval costs in Mumbai are also very high and, as per Ajay Ashar, the presidentelect of MCHI and CREDAI, developers end up paying 50-60 per cent of their input cost in the premiums. Developers said adding fuel to the plight of home buyers and developers is the sudden rise of the repo rate and mortgage rate.
As per Hitesh Thakkar, the vice-president of NAREDCO, if the construction cost increases, developers who have projects in Mumbai can absorb the cost. However, developers who are in the affordable segment will get badly affected. He said cement, steel and other raw material priceshave increased, adding to the cost of construction with premium payments among other expenses.
The increased cost, he said, affects the profit margin in the affordable segment. Meanwhile, NAREDCO has been demanding reduction in GST on cement and steel, which is currently 28 per cent. Thakkar said the government should consider that the industry provides job opportunities to skilled and unskilled sector.
Thakkar said the government should consider their demands since this industry largely provides job opportunities to skilled and unskilled sector.
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