Property prices across the country are set to rise, as developers battle a massive surge in raw material prices. From PVC Pipes to cement to hot rolled coil steel prices, raw materials costs are soaring and in some cases are up 50 per cent to 100 per cent. Even if you assume that land prices for developers will not go up, based on the labour and raw material costs, property prices are slated to rise.
"There has been a massive price hike of 50-100% in raw materials used by the real estate sector like steel, cement and PVC pipes since past few months. These items also form the largest chunk of the raw materials used by the industry players. Ever since RERA has been enforced in the country, the developers cannot increase the prices of the properties after they submit their project details with the respective authorities. Hence, this hike in prices will severely dent the viability of the sector which has already been reeling under the fierce onslaught of the pandemic and the resultants lockdowns. There needs to be a check by relevant authorities on such irrational price hikes" said, Manoj Gaur, CMD, Gaurs Group and Vice President - North, CREDAI National.
The hot rolled coil steel prices have remained above Rs 60,000 mark for most days of this month (May 2021) which is about 75% higher as compared to the average prices of May 2020. Even as compared to April 2021, the prices of this category of steel have gone up by around 10%.
"Steel is a major raw material of the real estate industry. Although we are trying to absorb the hike in the cost as much as possible, the sharp increase in prices of this key input may affect the final pricing of the properties at some stage," said Nayan Raheja of Raheja Developers.
Most market observers believe that property prices would rise, as present prices of property may not be sustainable, no matter, whether it is cities or smaller towns. In fact, tier 2 cities may generate an even stronger interest.
"We expect property prices to start hardening within 12-18 months because of the healthy demand," says Akash Pharande is Managing Director, Pharande Spaces.
With vaccination drive on at a full space, the Covid-19 worries are likely to be behind. This could lead to normalcy being restored even in the property markets. It is highly likely that we may see property prices moving higher, as raw material prices surge and also as demand is back.
Home loan interest rates likely to remain low
Interest rates continue to remain at historic lows and home loans are the cheapest form of loans. This is unlikely to change anytime soon, which will continue to drive demand for home loans and hence homes. The Reserve Bank of India has said that it would continue to have an easy monetary policy, which is good news for home loan borrowers.
There is every reason to believe that property prices are headed higher in the next few quarters. If you are looking to purchase it maybe a good idea not to postpone any longer.