The prices of real estate have increased by 5% to 8% owing to an increase in the construction cost. Rates are likely to climb by 5 to 7 percent. As a result, the overall rise in India will be around 10% to 15%. A Credai poll reports over 40% of developers believe they will be unable to continue and deliver projects unless relief measures get implemented.
Roughly 40% of property developers believe they would be unable to finish their projects unless the government takes prompt action to give relief. They anticipate it would give them respite from the steep increase in the pricing of building raw materials like cement and steel.
Cement costs have jumped by almost Rs. 100 per bag. Steel prices are up to Rs. 89,000 per metric tonne from Rs. 45,000 per metric tonne last year.
The building raw material prices have also been steadily rising over the past two years. Prices have increased significantly because of the ongoing conflict between Ukraine and Russia. Oil prices in worldwide markets, including the Indian market, are high, contributing to the price increase.
Across the country, prices are likely to rise by 10-15%. According to our poll, 65 percent of developers believe that prices would increase by 10%. The impact would be the greatest on the inexpensive housing market.
While price increases have been an ongoing concern for the past two years, the present scenario, which has resulted in certain raw material costs soaring by around 115 percent, has made it hard for developers to deal with the crisis, according to Credai. He also stated that abandoning work is not a viable option for dealing with it.
Boman Irani, the president-elect of Credai, stated that home costs in Mumbai had already risen from 5 percent to 8 percent. He believes the government must step in and limit construction material pricing. He also requested GST input credit for construction materials, consumer incentives such as stamp duties, waivers, and financing rate reductions.
If steel prices returned to Rs 50,000 per metric tonne, this would give tremendous relief to our clients.
Sentiment in the real estate industry has reached a new high
Real estate sentiment has been positive and has reached new highs due to the strengthening business climate supported by high immunization coverage, solid home sales activity, and robust office leasing momentum.
According to the Knight Frank-FICCI-NAREDCO Real Estate Mood Index for January-March, current sentiment reached a record high of 68, suggesting that most stakeholders witnessed positive changes in their companies in the previous 6 months, including the survey period.
Surprisingly, the Future Score of 75 was high. This score represents the developers’ and investors’ predictions for the following six months.
The latest sentiment score has risen from 65 in the past quarter to 68 as most real estate stakeholders have continued to see favorable growth over the last six months. As the Indian economy negotiated the third wave while facing the uncertainties of a European war, the real estate sector’s momentum, particularly in the residential segment, continued uninterrupted.
Commercial real estate segments experienced growth during the pandemic’s respite. While sentiment has been good for the past two quarters, this score is the highest in the survey’s history.
The future sentiment score, which measures stakeholders’ expectations for the next six months, also increased in the face of a steadfast economic outlook and ongoing consumption for realty spaces across asset classes.
According to him, the position is exacerbated further by supply chain interruptions, rising input costs, and an imminent interest rate hike, all of which must get closely monitored shortly.
In terms of loan availability, 66 percent of respondents expect funding availability to rise within the next six months, while 29 percent expect it to stay the same.
According to him, the progressive increase in sales across regions, opening of offices around the nation, and existing tenant demand in commercial leasing would contribute considerably to the predicted robust rebound and enhance consumer mood.
The South Zone maintains the most hopeful market in the current quarter, with the highest score among zones. South’s Future Sentiment Score increased from 64 in the December quarter to 66 in the March quarter. The other two zones, west and east, maintained their hopeful position with 57 points apiece.
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