High cement, steel prices push up construction costs by 40 percent

Nov 20,2021

The cost of construction has increased by 35-40 percent 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 Rs 5 lakh to Rs 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 Rs 46,000-Rs 48,000 per tonne to Rs 69,000-Rs 72,000 per tonne.

“Sand is not available for less than Rs 1,100 per tonne. Similarly, the cost of cement has shot up. Cement used to cost Rs 280 to Rs 300 per bag depending upon the quality and brand. Now, it costs Rs 400 to Rs 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 (sqft) has gone up from Rs 4,500 to Rs 5,500. It was about Rs 3,500 per sqft 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 percent. Earlier, a flat used to cost Rs 40 lakh depending on factors such as square feet and location. Now, the builder has to sell a flat at Rs 45 lakh to Rs 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 the 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.

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