Property prices in and around Calcutta could shoot up by as much as 15 % as city developers contemplate a basket hike in product prices to combat a steep rise in input costs. The real rise in realty rates, though, could be tempered by a slack market.
According to Pradeep Sureka“There’s no way we can absorb the entire burden of escalation in the cost of steel and cement, the two basic raw materials in real estate construction. We are in dialogue with our members and prices for new properties are set to be revised upwards soon,”.
Cement prices have gone up 20 %, while steel is dearer by 40 %, followed by the recent hike in petroleum products, to push builders into a corner since they are forced to absorb the 20-25 % rise in construction costs in pre-sold projects.
However, given the demand slowdown in an inflation-hit market, increased interest rates and the specter of dearer home loans, real estate developers could find it difficult to go for a one-shot rack rate hike.
“Yes, builders might be forced to spread the hike across installments, given the cautious consumer mindset,” felt Pradip Chopra of the PS Group, former secretary of Credai Bengal.
Members of Credai Bengal are scheduled to meet next week to discuss the sale price hike of upcoming properties. Builders in Bangalore and Pune have already announced a rack rate increase, while Mumbai is set to follow suit on 16th june.
Sureka feels the prices of new flats in city core areas would go up by five to seven per cent while in suburbs, where construction cost is often 80-90 % of the project cost, thanks to cheaper land, property prices could soar even 10-15 %.
“Prices are bound to go up, sooner than later, and the LIG and MIG segments would be the worst-hit,” agrees Chopra. He feels there would be a scramble for price correction in new projects and unsold stocks as developers rush to recover losses incurred on pre-sold products with no escalation clause.
Not just cement, steel and oil, but rising labour and contractor fees plus transportation cost have also contributed to the difficult situation, points out Piyush Bhagat of the Space Group. The city realty firm has already announced a 12 % rise in the sale price of a housing project in Belur.
“The quantum of hike has to be left to individual companies, because the profile of the product and the location all matter,” says the Credai Bengal president whose company, the Sureka Group, has announced an upward revision of Rs 100 per square foot in two of its Rajarhat projects.
Around 2,500 flats are being built in city core areas and 6,000-7,000 in the suburbs.