Parsvnath, others to hike prices

Builders blame the hike on rising input costs of materials like steel, cement and others by over 50 per cent in the last one year.

Parsvnath Builders has already increased prices in the range of 3 to 10 per cent for their different projects in the current month.

"There will be another similar price revision in July," admitted Pradeep Jain, chairman, Parsavnath Builders. Shobha Developers has also increased prices between Rs 20 and Rs 150 per sq ft. Many others like Akruti City, Omaxe, Ajmera and the Neelkanth Group are looking to do the same soon.

According to industry estimates, the overall construction cost has increased by 20 per cent in the first quarter and by more than 50 per cent in the past one year. This includes cost of steel, cement, wire and cabling, labour and interiors.

No wonder, builders are being forced to push prices. "Though the sales are low, we need to increase the property prices as the construction cost has dramatically risen," said Mukesh Patel of the Neelkanth Group.

He feels that this trend will continue for the next few months till developers are able to exhaust their current inventory.

Another reason for realtors to increase prices is because many of them have taken project loans from financial institutions and are incurring high interest costs. Besides, to attract the upmarket customer, most of them have built-in amenities that are very expensive.

A Mumbai-based developer, listed on the stock exchange, on condition of anonymity said even if developers wanted to reduce rates of the current projects, they could not do so because many of them were providing marble flooring, high-speed lift, pre-fitted bathrooms and modular kitchens.

"Once the developer has used these as standard fittings, they need to continue with it in the entire project," said the developer.

While raising prices is one way of solving the problem, many builders are resorting to other methods, where they can reduce their costs for future developments.

Sunil Malhotra, vice-president, finance, Omaxe Developers, said making the house more basic by reducing frills used in the interior is one option it is adopting for its new projects. For instance, rather than marble flooring, the company will give vitrified tiles.

Sobha has started producing its own material to insulate itself from the material price hike. J C Sharma, managing director, Sobha said, "We are putting up our own plants for processing materials and reduce purchase."

The company is putting up a bar bending plant that will take care of steel products needs. They are also setting up four plants to manufacture ready-mix concrete.

The problem, as of now, seems temporary for builders. Many feel that by Diwali, when the buying season kicks in, they would be able to enter new projects that would be cheaper.