News: Housing prices witness an uptick across key property markets in January-March-05-04-2022
Prices of residentialreal estate have started inching upward across the country as improving demand has supported the optimism among developers to increase rates. The combination of revival in demand and rising cost pressure has resulted in housing prices moving higher as developers attempt to protect their margins. Without exceptions, all the top eight markets witnessed a rise in the average capital values of residential properties as demand continued to strengthen. All cities posted up to 7% year-on-year growth in per sq ft prices during the quarter ended March. Prices grew the most in Bengaluru at 7% on-year followed by Pune and Mumbai at 5% and 4% on-year, respectively. The lowest price rise of 1% was witnessed in Hyderabad and Chennai, showed data from Knight Frank India.
Reflecting resilience of the housing markets as against other real estate assets, according to Magicbricks, the pan-India prices have increased 6.4% from a year ago. The prices of ready to move properties have increased 1.7% sequentially and 5.8% from a year ago, while the prices of under-construction properties were largely stable during the quarter with a sequential increase of 0.6% nationally.
“While financial stress remains a significant factor for developers across markets, healthy and sustained homebuyer activity should pave the way for gradual price increases and enable them to tide over the rise in costs of critical inputs like cement and steel,” said Shishir Baijal, CMD, Knight Frank India. The housing demand has certainly witnessed a revival; however, experts are offering a word of caution to realty developers to ensure the demand uptrend continues without any disruption due to price increase.
“Demand is going up as indicated by rising enquiry levels and sales. Most of the price hikes are taking place because of revival in demand. We are hoping it will be more gradual and marginal from here on. We are in a sweet spot right now and any speculative hikes or prices going up in a sharp way may dampen the demand,” said Sudhir Pai, CEO, Magicbricks.
Realty developers across key property markets have already stated their plan to increase prices of unsold inventory that is currently under construction to cover the surge in input costs.
Prices of key raw materials including steel, cement, aluminium and PVC have risen sharply between 30% and 100% during the last year itself. In the backdrop of the Russia-Ukraine war, rising cement and steel prices along with the rise in prices for fuel have turned into one of the main points of concern for realty developers across the country
According to Baijal, rising input costs and steep inflation since the past couple of quarters are pressurizing developer margins. Whilst the pressure on developers will remain to increase the prices, how much of this can be passed on to the end-user would be a moot point.
Concerned over the cost pressure, realty developers across the country have been seeking the government’s intervention to arrest the increase in the cost of building materials, especially steel and cement
They have suggested that the import duty on steel be brought down to zero from 7.5% for a period of two years and that a ban be imposed on the export of steel for two years till the issue related to high pricing and availability in domestic markets are resolved.
Besides, developers also suggested the price of steel and cement needs to be regulated till the time the supply is restored in the domestic markets and both cement and steel should be put in the lower slabs of the goods and services tax (GST).
The rise in prices of pet coke, coal, and fuel costs, as well as freight rates, are all contributing to an increase in cement prices—one of the most integral raw materials for the real estate industry. While the sector has remained resilient, more than a 40% increase in raw material prices is a concerning sign for the industry.
