Soaring costs of raw material costs forces developers in Ghaziabad to a grinding halt

Ghaziabad, March 26, 2022: Due to rising costs of energy goods in the international market directly inflating the cost of the raw materials, the situation seeming to be further catalysed in the wake of the Russia-Ukraine war. Following in the steps of the collective initiative made by the developers in Maharashtra, CREDAI Ghaziabad, a body which represents real estate developers of Ghaziabad, are planning to completely stop the purchase of raw materials and halt the construction work, fearing these elevated costs will ultimately result in projects getting stalled due to their financial viability turning negative.

Vipul Giri, President, CREDAI Ghaziabad, said “The costs of key raw materials such as steel, cement used in construction have gone up amidst global supply chain disruptions. After Covid, the current crisis is a dual blow on real estate developers as they are finding it extremely tough to deliver projects within the projected timelines and costs. For steel particularly, the situation is so bad that suppliers are not willing to take orders even at elevated prices”.

As of March 2022, the conservative figures of the impact on the construction cost may be taken to be about Rs. 500 per sq. ft. or more which directly trickle down to the increased prices for home buyers for fresh sales. 

Giri further added, “Builders, while free to increase prices of unsold inventory, are stuck where they have pre-sold the inventory. Perhaps this situation should be recognized as force majeure and prices allowed to be escalated even for sold inventory. Otherwise, we are looking at the next wave of stalled and unviable projects”.

Apart from realty developers of Ghaziabad, Delhi-NCR, the CREDAI members in Maharashtra are also contemplating stopping work as it is not possible to build houses by purchasing raw material at these increased prices. They have also demanded extension for the closed down projects for completion. For these demands, CREDAI Maharashtra members have written to Deputy Chief Minister and Finance Minister Ajit Pawar and Revenue Minister Balasaheb Thorat.

CONSTRUCTION MATERIAL COST COMPARISON*