The downturn in the construction sector despite a positive sentiment in the market and an increase in selling in the real estate sector is directly caused by the rise in construction material prices and the cost of labor. Some major reasons for this cost increase are rising raw material shortage, rising global material prices, production challenges, logistic challenges, increasing fuel prices, etc. Overall, there is a rise of about 14% in Mumbai while Delhi, Pune, and Bangalore are eyeing a rise of 10-12%.
With the Russia-Ukraine war, the price of Brent crude oil crossed the $110 per barrel mark. It is one of the major components used in making paints and accounts for more than 50% of the total expense of the paint companies. Already, Asian Paints, one of the major paint brands in the country, in nine months of FY22, took a cumulative price hike of around 22% in response to nearly 25% raw material inflation.
Union Steel Minister, RCP Singh, informed that steel products used in the infrastructure sector such as wire rods, plates, and TMT bars have gone up by up to 117% in the last six years.
The Facebook page of Ply Reporter, leading media for the wood & panel industry in the country, remains flooded with the price rise posts related to laminate and other plywood products. I have not seen such volatility in prices in the last 7-8 years.
There has also been a hike in the prices of sand, glass, PoP, and other construction materials.
Tiles segment has already been facing the brunt of rising raw material costs for some time despite showing the quickest recovery post-pandemic. For a change, the demand in the luxury segment bounced back after several years. Sales in the luxury segment (>INR 3 Cr) almost doubled in 2021, compared to 2019. Luxury sales accounted for the highest share in three years, as per CREDAI MCHI, Colliers, and CRE Matrix.
The combined impact of the surge in input costs is likely to escalate the cost of construction further, especially for under-construction projects, and thus impact pricing in the real estate sector. It is time to be cautious and keep the price rise into account while starting new projects.
Editor-in-Chief, Surfaces Reporter
Founder, WADE ASIA, Women in Design & Architecture