Realty firms may witness margin shrink by 4-6% due to steel price rise

Surge in prices of steel products that are used in the construction sector has an adverse impact on the real estate companies as these entities are now not in a position to pass the additional cost on their buyers and may witness shirking of margin by 4-6 per cent, realtors said on Tuesday.

The steel prices have increased at a time when demand for property is slowly getting back on the track with the government measures and low interest-rate regime, they said.

Price of construction steel or TMT bars had recently touched Rs 45,000 a tonne in some markets, which was at least 30-40 per cent higher than the rate in the pre-COVID period.

"The steel price rise is hurting the real estate companies as the property prices are under pressure. The additional cost will result in a shrink of gross margin by 5-6 per cent," Bengal Peerless Housing Development Company CEO Ketan Sengupta told PTI.

Real estate industry body Credai Bengal president Nandu Belani said the spurt in steel prices will reduce the margin by 4-5 per cent, which is quite high for the sector.

Presently, only the residential sector has seen a revival of demand, while the commercial and industrial segment is still reeling under pressure, and the high cost will discourage builders to delay the launch of new projects, the officials said.

"We are not planning to launch new projects due to market condition and will review the situation by the end of the fiscal and then take a call," Sengupta added.