SPIRALING COST OF RAW MATERIALS AND LABOUR
STAFF REPORTER
GUWAHATI: Assam Real Estate and Infrastructure Developers' Association (AREIDA) president PK Sharma has said that the sudden and rapid rise in costs has eaten into the thin margins of realty projects and rendered them unviable and, as an immediate measure, the AREIDA held an emergent general meeting on March 26 and unanimously decided to increase the price of all flats by Rs 600 per sq ft with effect from April 20 to cover the increased cost of construction.
Addressing a press conference here on Monday, Sharma said, "Affordable housing, in particular, is now impossible. The developers in Assam are faced with this alarming situation and have no choice other than to take some drastic measures to survive. The revenue generated from the projects would not cover even the cost of construction, given the fact that prices on actuals have risen by Rs 600 per sq ft since 2020. The cost of 19 key raw materials, such as steel and cement used in construction, has gone up with vendors citing global supply chain disruptions due to the war in Ukraine."
According to the AREIDA president, the percentage of increase in prices of some key construction materials and labour between October 2020 and March 2022 is – the cost of TMT bars (Durgapur) has increased by 90.70 per cent; the price of black wire has increased by 52.38 per cent; the price of nails has increased by 50.79 per cent; the price of sand has increased by 36.36 per cent; the price of chips has increased by 20 per cent; the price of tiles (2x2) has increased by 25 per cent; the price of cement (national brand) has increased by 15.07 per cent; the price of bricks per piece has increased by 22.22 per cent; the cost of aluminum windows per sq ft has increased by 50 per cent; the cost of PVC pipes has increased by 21.43 per cent; labour wages have increased by 50 per cent per day, and mason wages have increased by 40 per cent per day.
He said that after COVID-19, the current crisis is a dual blow to real estate developers as they are finding it impossible to deliver projects within the projected timelines and costs. For steel particularly, the situation is so bad that suppliers are not willing to take orders even at elevated prices. All construction work, be it Pradhan Mantri Awas Yojana or infrastructure projects of the government, have been severely impacted, Sharma said.
"While we are free to increase prices of unsold inventory, we are stuck where flats have already been sold. Unless the escalation on actuals is allowed, we are looking at the next wave of stalled and unviable projects," he said.
The prices of steel, cement and other construction materials have been rising steadily over the last two-and-half years. These have now skyrocketed at a level beyond the affordability of all developers, he said.
He pointed out that the RERA (Real Estate Regulatory Authority) Act, 2016 did not restrict an escalation clause in the builder-buyer agreement. Unfortunately, he said, the State RERA Rules imposed a draft agreement with a mandatory no-escalation clause. However, he said, there have been several judgments in the meantime, which have decreed that the Rules can under no circumstances override the Act. The Supreme Court has also directed the Central Government recently to frame a national buyer-builder agreement applicable across the country.
"All concerned must understand that if a promoter is rendered bankrupt due to an abnormal increase in construction or for any other legitimate reasons, it will be impossible for him to complete the project and this can never be in the best interest of the flat purchaser," he said.
He added that the AREIDA has also requested RERA for an extension of six months in the project completion period as projects across the State have been disrupted due to this abnormal increase in costs, as well as the inclusion of an escalation clause in the builder-buyer agreement where escalation based on actual figures must be factored in.
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