Now rising steel prices hit real estate business

The sluggish real estate market in the region is further likely to decelerate with rocketing steel and cement prices, that would hit the bottomline of real estate developers.

Real estate agents are caught in a Catch 22 situation as the over supply has already hit the sales of residential properties, and property developers are now being forced to go in for yet another revision in property prices in the coming months owing to a sharp rise in steel and cement prices.

With steel prices hitting the roof and the Finance Minister proposing to increase the excise duty on bulk cement, the real estate is in quandary over whether to push up the prices immediately or not.

The property players, while interacting with Business Standard, admitted that the real estate prices, as well as allied construction activities' cost, would shoot up in the coming future, thereby resulting in upsetting the calculations of potent buyers.

Maneesh Uppal, managing director of the Uppal Group said that the increase in steel prices will force companies engaged in construction activities to juggle up the prices and the cost of commercial and infrastructure projects may see a higher rise as compared to residential projects.

However, not many real estate agents are keen to push up the prices of real estate as it may hinder potent buyer from making any purchase.

Most of the property players, as of now, are trying to absorb the shock of the rise in steel and cement prices without transferring it to the buyers.

Pawan Khare , marketing manager of AP Shresth Colonisers said that the effect of a hike in excise duty is likely to be absorbed by the real estate players themselves as the hike would only be marginal.

"With the competition growing, no developer wants to take the chance by raising the price of his flats" feels Khare.

Manoj Bisht, manager marketing and sales of CHD Developers Ltd said that any immediate price revision by real estate players could be dicey; so, the players are prepared to absorb the losses which could be to the tune of 10-15 per cent.

He, however, said that the real estate companies would try to make up for these losses by increasing prices of projects that would be launched in the coming months.

G V Savlani, resident director of the Confederation of Real Estate Developer's Association of India (CREDAI), when contacted, said that the steel prices have, in the past, shot up and that real estate developers may not go in for increasing property prices immediately.

The cost of steel has risen from Rs 27.7 per kg in 2006 to Rs 45 per kg in 2008. Therefore the increase in steel prices is considered to be marginal by real estate players as of now.

Any increase in real estate prices now will not only pinch the pockets of buyers but also hurt the prospects of real estate players.

But, with little option left, most of the property players will be forced to revise prices sooner or later.