War in West Asia has impacted each sector and real estate cannot be isolated. In an interview to businessline, Shekhar G Patel, President at CREDAI National said that price of new projects could see an increase up to 10 per cent.Edited excerpts of the interview.
What was the impact on the cost due to the West Asia war, and which were the key contributors?
Post the beginning of the war at the end of February, costs of a lot of raw materials surged. For example, aluminium, which is a basic raw material, saw an increase of nearly 60 per cent, steel prices went up by 25-30 per cent and cement by 25-30 per cent. Overall, the cost of construction — and not the cost of the project — has an impact of 15-25 per cent at various places. Once the war ends, it will take some time to get the benefit of lower crude prices and when the fuel prices come down, it will take 1-2 months to see the impact. So, we expect the cost impact to continue till the end of August, provided the war ends now. If the situation remains normal in August and crude prices come below $80 a barrel and the supply chain continues, then I think the construction cost will start to be a little reasonable.There is a compulsion in RERA that the units that you have already sold, you cannot increase the price. This means the loss that the developer will have to bear and part of that can be covered by increasing the price of new units. It comes in an increment of 2-5 per cent or 7 per cent.
