According to a report, developers’ average cost of construction has increased by 10-12% due to high input costs and supply constraints over the last one year.

The cost of construction materials like cement and steel increased by 20% as of March 2022. The developers have been largely affected by the surging price after recovering from the Covid-19 pandemic.

CEO and Managing Director at Market Development, Asia, Colliers, Ramesh Nair, told the media that due to the rising cost of construction materials, the developers would have to increase prices as construction materials constitute 2/3rd of the construction share.

He said that the price surge would affect the developers in affordable and mid-term segments, operating on low margins. The wholesale price inflation (WPI) and material cost have witnessed a surge. The construction costs can grow by 8-9% extra by December 2022.

The residential projects in the affordable and mid-term housing segment have lower margins. The major input cost can affect the developer and end-users.

Chief Operating Officer (COO) at Colliers India, Argenio Antao, said that developers are facing high costs but are cautious in increasing the price for end-users. The government could provide lower import duty as a form of relief to developers.

Managing Director of Trehan Group, Saransh Trehan, said that the prices of steel and cement had increased sharply in the last two years. Steel prices have increased by 100%, while cement prices by over 30%. Prices of other materials, including aluminium, electric wires, paints, stones, etc., have increased by over 50% in two years. The price hike in construction materials has increased construction cost per sq ft.

However, Grade-A developers might withstand the price hike due to its dynamic demand. Small developers might enter into a joint development agreement to face the price hike.

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Also read: Ways to deal with the current construction materials prices hike