Guntur builders hit by steel scarcity raw material woes

Middle class buyers of apartments in Guntur and neighbouring areas fear that the quality of apartments will suffer because of the steep hike in cement and steel prices.

Availability of 8-mm 'bullet' steel, normally used by all the builders in laying crucial slabs, is scarce while prices of cement have also gone up.

About 70 builders in Guntur have stopped construction of new apartments and fear that they may be forced to use substandard 'scrap' steel and low quality 40 grade cement (PPC) in about 1,000 apartments under construction.

While mini-steel plants, which sell scrap steel, are reportedly doing good business, over 150 first time builders, may be forced to exit the building business because of the rise in raw material prices.

While banks and other financiers have been liberal with their home loans, the hike in cement prices and scarcity of steel may hamper the pace of house construction, they point out.

The price has ensured that the price of a two-bedroom apartment has gone up by about Rs 1.25 lakh to touch between Rs 11.25 lakh and 13.25 lakh. Prices for three-bedroom apartments have on an average increased by Rs 2.5 lakh to hover between Rs 20.5 lakh and Rs 22.5 lakh. It is estimated that builders will lose similar amounts on apartments which are under construction.

If this trend does not stop, simple apartments also would go out of the bounds of middle class people "� just like independent houses a few years ago, said G Balaji Reddy, treasurer of the Builders Association of Vijayawada. He cited the buying up of massive quantities of steel by China, which is preparing for Olympics, from India as one of the reasons for the steel scarcity.

Prices of paints have also gone up by 30 per cent. Ten years ago a two-bedroom apartment was available for about Rs 2 lakh. The price of a two-bedroom apartment now is around Rs 15 lakh and a three-bedroom apartment between Rs 20-22 lakh, they said.

Steel market sources, on the condition of anonymity, revealed that the Vizag Steel Plant (VSP), which is the only major supplier of quality bullet steel in the state, does not produce 8-mm steel anymore. VSP's few distributors, who have monopolised the market, convert VSP steel into 8-mm steel and sell it.

These developments have gone in favour of mini steel plants in the state, which supply scrap steel at Rs 5,000-6,000 lower than the price of bullet steel per tonne.

The alleged cement cartel has increased cement prices from Rs 95 to Rs 145 in phases from November last year, according to builders.

Meanwhile, fears of a revival of the Telangana agitation have pushed up real estate rates by Rs 30 lakh to Rs 40 lakh per acre in the Krishna and Guntur districts. Real estate companies now offer up to Rs 1.5 crore per acre for the land along the national highways.

It is learnt that settlers from coastal Andhra have stopped buying land in Hyderabad and are now diverting their investments to Guntur and other places.

Normally, small cement companies break the cartel in a short period and make hay at the cost of big companies by selling 40 grade cement (with higher flyash content) at Rs 5 to Rs 6 lower than that of 53 grade cement (with lower flyash content) manufacturers.

Meanwhile, fears of a revival of the Telangana agitation have pushed up real estate rates by Rs 30 lakh to Rs 40 lakh per acre in the Krishna and Guntur districts. Real estate companies now offer up to Rs 1.5 crore per acre for the land along the national highways.

It is learnt that settlers from coastal Andhra have stopped buying land in Hyderabad and are now diverting their investments to Guntur and other places.