Govt's intervention on steel, cement to help realty developers lower construction cost stress

The government’s decision on Saturday to lower duty on some raw materials of steel, levy charges on export of steel products and take measures to improve the availability of cement is expected to help real estate developers lower the upward pressure on cost of construction.

Realty developers have been voicing their concerns over spike in prices of steel and cement, key construction raw materials, in the backdrop of supply disruptions owing to global geo-political situation.

While the rise in prices has been an ongoing issue for the past two years, the current situation owing to the Russia-Ukraine war has resulted in prices of some of the raw materials increasing over 100%, making it tough for developers to deal with the imbroglio.

“The momentous move by the government to reduce import duties on steel products should provide a sigh of relief to all stakeholders. Additionally, reduction in import duty of iron ore and steel intermediates will further bolster the availability of raw materials domestically, cool off the prices of steel products, and help tide the rise in prices of projects, strengthening consumer sentiment,” said Harsh Vardhan Patodia, President, CREDAI.

Patodia hopes that manufacturers will pass on the price cuts to end users. This will help the real estate developers negate increased construction costs over the last two years, which will help prospective homebuyers.

On Saturday, Finance Minister Nirmala Sitharaman announced several measures including a sharp cut in central excise duty on petrol by Rs 8 per litre and Rs 6 per litre on diesel to control inflation. Along with reduction in customs duty on some raw material of steel, the government has also stated that measures are being taken up to improve the availability of cement and through better logistics to reduce the cost of cement.

“This will surely provide some cost relief in terms of steel and cement prices. The reduction in fuel and cement prices will have a overall good impact on the real estate sector to keep the prices in check. However, we also request the government to work on making interest rates on home loans lower and making GST input credit available to the developers at the current GST slabs. This will surely reduce the home prices making it beneficial to the larger part of the society,” said Sandeep Runwal, President, NAREDCO Maharashtra.

In a bid to tackle the input cost pressure, several developers have already increased residential property prices by 6-8% across key property markets of the country including Mumbai, Delhi-NCR, Bangalore, Pune and Hyderabad in the last few months. Apart from increasing prices, developers were also considering slowing down construction work.

The government’s assurance to improve logistics and help domestic availability of cement and lowering custom duties on coal products used in the production of cement will have a positive impact on the cost of the commodity.

According to experts, a reduction in prices of fuel tax to pre-covid levels will help bring down the transportation costs of all raw materials and essentials in industries agnostic of their businesses and reduce the pressure on the end consumers.

Going forward, developers suggest the state government cut down on state-specific duties on fuel too to have a direct impact on the rise in inflation.


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