Realty prices seen up 10% post-Budget

The rise in input costs is likely to push up real estate prices by about 10 per cent.

"The increased prices of cement and steel will drive up construction costs by over 10 per cent and the additional burden will have to borne by the end user," said Pawan Bakeri of Bakeri Engineers and Industries, a real estate developer in Gujarat.

In the recently announced Budget, Union finance minister P Chidambram raised excise duty on steel from 8 per cent to 12 per cent.

Meanwhile, improved demand without a corresponding increase in capacity has pushed up cement prices by over 10 per cent.

"Cement prices are bound to go up by over 10 per cent due to the buoyancy in domestic demand and increasing exports. Rates should rise to Rs 180 per bag in the next six months from Rs 160 at present. The Budget could have offered volume discounts and bulk booking incentives to the cement industry," said Hemant Pandey, senior president, Sanghi Industries, which has a cement unit in the Kutch district of the state.

"The Budget will have an adverse impact on the real estate industry as the hike in excise duty will push up steel prices by around Rs 1000 per tonne. Cement prices are already on the rise. The cost of real estate is expected to go up by over 10 per cent," said Suresh Patel, secretary, The Gujarat Institute of Housing and Real Estate Developers.

Moosa Raza, president, Indian Steel Alliance, feels the Budget initiatives will hurt steel producers.

"The combination of a reduction in customs duty and an increase in excise duty in the Budget will dissuade entrepreneurs from investing in the steel industry," he said.

The extent of the rise in real estate prices owing to the hike in steel and cement rates depends on the stage of civil construction, says Rajesh Vasanwala of Prapti Construction, a real estate developer in Vadodara.

"The hike in tax will badly hit those who are just beginning construction work," he pointed out.

Some real estate developers feel the rise in realty prices will take a couple of months to take effect.

"No developer will increase prices immediately. It will take at least 2-3 months before we see any hike in real estate industry," said Nakul Joshi, sales manager, Pratham Realty, another Vadodara-based real estate developer.

"Apart from the increasing prices of cement and steel, two principal raw materials for our industry, the price of land is also going up. The resultant increased prices of real estate will leave consumers with low purchasing power," said Bharat Shah of Sangam Constructions, a Surat-based real estate developer.

Stamp duty is another important concern for real estate developers of Gujarat.

"The stamp duty of around 10 per cent is highest in Gujarat. We had made a presentation to the state finance minister for lowering this to three per cent," said Arun Chaturvedi, president, Federation of Real Estate Developers Association of Gujarat.