HOUSE OF WOES

The contraction of the construction indutry in the third quarter along with the rising cost of essential rawmaterials and ‘wait-n-watch’ by potential homebuyers may flounder the overall revival narrative

-  Ashish Sinha

BARELY 70 DAYS AGO, while providing its outlook for 2022, Knight Frank India, a leading real estate consultancy firm said that housing prices may rise 5 per cent during 2022 on improved demand. Similarly, a CII-ANAROCK Consumer Survey – H2 2021 said 56 per cent of respondents expect the housing prices to rise in 2022. “The housing prices are likely to rise 5-8 per cent in 2022 due to increased input cost pressure and supply chain issues. Hardening interest rates, which are very likely in the second half of 2022, will be another factor driving up the overall acquisition cost for homebuyers,” Anuj Puri, Chairman, ANAROCK Group said. The survey concluded that a sub-10 per cent price increase would have a moderate-to-low impact. However, an increase of more than 10 per cent would have more profound repercussions on buyer sentiment. Therefore, the larger takeaway is: “Pay more for your home in 2022.”

Then comes the Russia-Ukraine crisis. As a result of that, the Brent oil prices have risen by 29 per cent globally. In India, increase in crude prices will push the domestic fuel prices which in turn will impact the transportation cost that alone accounts for 20 per cent of the total construction costs. Steel prices have risen by about 17 per cent in just a week. Cement prices are rising too. “The combined impact of this surge in input costs is likely to escalate cost of construction and thus impact pricing in the real estate sector,” says Ramesh Nair, CEO, India & Managing Director, Market Development, Asia at Colliers.

The Numbers Game