Cost Escalation Threatens Realty Recovery & Growth
The real estate sector, especially the residential segment, which showed great resilience against the Covid pandemic to register a smart recovery, is now facing a double whammy. The long-drawn Ukraine-Russia war has led to a sharp increase in input costs, on top of which, the RBI has tightened its monetary policy with a sharp 40 bps rise in repo rate. All this threatens the ongoing real estate recovery and its growth prospects.
Vinod Behl
Real estate developers are facing a two-pronged challenge: on one hand, they have the challenge of reducing debt and improving their cash flow by clearing home inventory (still hovering over 6 lakhs), and on the other hand, they are pushed to the wall to increase home prices amidst steep rise in input costs and upward revision in interest rates, which are adversely impacting home sales and cash flows.
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NBM&CW June 2022
