Published April 11th, 2022
The Housing Sector's Domino Effect

Our homes are constructed using Steel, Cement, Brick and Sand. When costs escalate for these raw materials, the effect is bound to be felt by the real estate industry. And sadly, that is the current state of affairs in India!

Besides the items mentioned above, prices of even electric wires, fittings, tiles, pipes, sanitary-ware, fabrication, secondary minerals have significantly risen by 40% to 45%. There seems to be an overall cost escalation by 20% – 25% in the construction business over the past 45 days or so. This in turn will compel builders to increase property prices by around 10% – 15%, starting April, 2022.

The professional body of realtors has made an appeal to the Governments (State & Central) to offer some relief by reducing stamp duty and GST rates, besides allowing the developers to claim ITC (input tax credit). Otherwise, the developers will have no choice but to halt the construction process, or hike the apartment prices.

Appeals are also being made to RERA for extension permissions up to 6 months, so that construction activities may be paused until some semblance of normalcy is restored.

Yet another fallout of the given situation would be a hard-hitting one. It is estimated that approximately 1 million workers are involved in construction, either directly or indirectly. Any halt in the business would impact them hugely.

This scenario if prolonged could hurt the real estate segment just when a revival is being seen in the residential sector. Thanks to stamp duty relaxations, low home loan interest rates and offers from developers, the real estate markets survived the pandemic phase. But now if the Governments don’t intervene, this industry which is the second largest employer, will not be able to withstand this backlash, and will most likely have a domino effect on all other sectors too.