Anticipating property prices to get cheaper? Following the 2nd wave, business activities in the country came to a virtual halt, and the economy experienced a jolt. As demand fell, so did the value of the real estate. However, the silver lining is that the situation has been stabilized, and the economy is now reviving. We will soon restore the numbers.
When a massive crisis like this unfolds, the impacts are numerous. It has a psychological as well as an economic impact. Buyers who were considering purchasing a home previously would now prefer to wait and watch, hoping for a price reduction or increased discounts. Though the expectations are logical, the realities on the ground are contradictory.
Most developers who have been hampered by the credit crunch and labor shortage are now facing a price increase in construction materials. Everything is at an all-time high, from steel to cement to bricks. In the face of such skyrocketing prices, waiting a long time may not be the best option.
Steel prices rising sharply
India’s steel prices have risen sharply in tandem with international steel prices. A ton of TMT steel bar costs around Rs 72,500, a significant increase from Rs 53,000 a year ago. Many Indian manufacturers are directing their products to international markets as global demand grows rapidly. This trend is not going away anytime soon, and it will continue to drive prices higher, accelerating the cost of construction.
Steep jump in cement prices
Cement prices, like steel, are entirely determined by market forces. The retail price per bag has increased significantly from Rs 420-460 in May to Rs 460-520 in June. Prices are increasing at a rate of 10% to 12% per month. This may be good news for cement stock investors, but it does not bode well for India’s real estate market. Cement, along with steel, is one of the most commonly used building materials. A price increase of Rs 50 per bag will result in a price increase of Rs 20 per square foot. The steep price increase, according to developers, occurred by cartelization among cement manufacturers. Cement manufacturers, on the other hand, have refuted these claims, blaming the increase on rising input costs.
Brick prices on an upswing
Brick prices in India are rising due to a scarcity of supplies. The price per cubic metre has now risen to Rs 3,250, up quickly from Rs 2,950 a year ago. The majority of the kilns closed during the lockdown and have only recently reopened. This will continue to put pressure on the supply, causing demand to rise. Any contraction will come as a shock because kilns are still doing brisk business. Sand prices have also risen to Rs 5,700, putting pressure on the real estate sector.
No relief in PVC pipe costs either
PVC pipes, another important component in the construction process, are also not exempt from rising costs. PVC prices have risen sharply to INR 129/kg, nearly doubling in the last year due to increased demand and global supply constraints. Furthermore, prices will continue to rise because input costs will not decrease due to polymer supply constraints. The challenges faced by developers will escalate if the price of PVC increases.
The onslaught of diesel price rise
The rise in global crude prices will have an impact on the Indian construction industry. The price of diesel is rising in India as a result of global price increases. Diesel accounts for about 35% of the operating cost of construction equipment, so a spike in diesel prices will have an impact on the industry.
The cost of almost every raw material used in construction is at an all-time high. Ironically, given supply constraints, rising global and domestic demand, and rising input costs, any price correction appears improbable.
Developers are already dealing with labor shortages, and a credit crunch, as well as an increase in raw material prices, will exacerbate their problems. As a result of being caught in the crossfire, developers have no option but to pass on the price increases to homebuyers.
At the moment, homebuyers must take caution. Although it’s tempting to expect a Property prices reduction, don’t wonder if it doesn’t happen. Property prices per square foot will continue to rise as input costs rise.
It’s a good idea to act now to protect yourself from an unexpected rise. Especially those who have been on the fence for a while, hoping for a price reduction. Prices are currently at an all-time low. Moreover, there are a plethora of appealing schemes available, all of which come with a lower interest rate. This could be one of the most advantageous times to purchase! The best decision sometimes depends on the underlying counter-logic rather than the logic itself.