To offset the increase in input costs, developers in the Mumbai Metropolitan Region (MMR), the country's largest and expensive property market, want to increase the prices of unsold inventory currently under development, by 10-15 percent. CREDAI-MCHI, the state's leading developer association, is proposing rigorous measures to contain rising input costs, which have increased building costs by Rs 400-600 per sq ft in the low- and middle-income housing categories. As pressure builds, the huge increase in input costs has had a devastating effect on developers across the country.

Maharashtra and the National Capital Region real estate developers have already stated their intention to halt raw material purchases and construction activities at their active sites due to rising input costs for crucial materials such as cement and steel. Although property developers in the Mumbai Metropolitan Region have not yet suspended development in the state, CREDAI-MCHI may consider doing so if existing efforts fail to provide the essential relief.

What the president of CREDAI-MCHI says

All CREDAI-MCHI members are dedicated to continuing building activities in order to avoid delays in ongoing projects and adverse effects on buyers. It is worth noting, however, that cement costs have increased by about Rs 100 per (50-kg) bag, while steel prices have increased from Rs 45,000 per metric tonne last year to Rs 85,000 per metric tonne today, according to Boman Irani, president of CREDAI-MCHI.

According to Boman Irani, the majority of projects, particularly those in the affordable category, have small margins of 10-15%, and the rise in raw material costs has resulted in a combined increase of more than 15% in construction expenses, rendering the same projects unviable at current sale prices. As a result, additional costs will need to be passed on to consumers to ensure the financial viability of many developers' projects.

Reason for increase in the raw materials cost

CREDAI-MCHI continues to interact with important government officials in order to secure assistance in bringing raw material costs under control. Additionally, the developers' association has proposed that the Maharashtra government postpone by at least two years its intention to collect an additional 1% metro cess on all property transactions in the state. Steel, cement, aluminium, and PVC prices have climbed from 30% to 100% in the last year. Increasing steel and cement prices, as well as rising fuel prices, have been a key cause of concern for real estate developers across the country in the context of the Russia-Ukraine conflict.

Pet coke, coal, and fuel prices, and freight rates, all contribute to an increase in the price of cement, one of the most critical raw materials in the building sector. Although the sector has remained resilient, raw material prices have climbed by more than 40%, a troubling scenario for the industry.

Things to expect in the near future

A recent CREDAI-MCHI study, which used MMR house scenario data, forecasts a 7-8 percent price increase over the next 12 months assuming the current year's quarterly price hikes of 2% continue. Looking at the constant obstacles in Russian & Ukrainian negotiations, and regular increase in the fuel costs, developers anticipate that prices will continue to rise in the coming quarter, hindering the sector's growth. CREDAI urged the government to demonstrate its continued commitment to the real estate industry by intervening in price increases.