Inflation Affecting Real Estate Prices

Thu, 07 Aug 2008 07:22:32 +0000

With inflation touching 12.98%, realtors here are finding it difficult to hold their price line and plan to increase rates for residential units by Rs 100-500 per sq ft later this month.
According to Confederation of Real Estate Developer’s Associations of India (Credai) Bengal, there has been a 25% increase in the construction cost of residential buildings over the last one year, almost double the increase during last year over 2006.
“Construction cost has increased from Rs 1,265 per sq ft in 2006 to Rs 1,811 per sq ft in July 2008, or by 43%,” said Pradeep Sureka, president of Credai Bengal. The city has added almost 10 million sqft of real estate space in last one year.
While steel prices have gone up by 107% in the last two years to Rs 45,500 per tone, cement has become dearer by 39% at Rs 4,900 per tone. “Even cost of bricks has doubled in the last two years to Rs 4.40 per piece,” Sureka said.
In April this year, Prime Minister Manmohan Singh had asked steel companies not to increase prices and the big steel makers had responded by holding the price line for three months.
“If the steel companies start increasing prices after August, prices could go up by Rs 500 per sq ft,” said S. Rungta, VP of Credai.
According to Credai estimates, direct and indirect taxes add nearly 27% to the cost of a six-lakh sq ft residential project with 30-40-metre high buildings. For a property selling at Rs 2,600 per sq ft, a buyer has to shell out Rs 211 as stamp duty and registration charges. Indirect taxes have already added around Rs 483 per sq ft.
Realtors said their sales have come down by more than 30% in the first quarter of 2008-09. Many of them will be gauging the customer mood at a property fair scheduled to open on August 11.
“We have requested Credai members to hold prices till Home Front-2008,” said Sushil Mohta, executive body member of Credai India, referring to the annual event.
However, banks said housing spends in West Bengal pick up after the second quarter, after people have done their festival spending.
According to SK Goel, chairman and managing director of Kolkata-based Uco Bank, the demand for housing in Kolkata and West Bengal starts picking up after the festive season.

India Real Estate Monitor » Direct And Indirect Taxes

Inflation Affecting Real Estate Prices