Increasing cost of raw materials to hit construction & real-estate sector

An increase in prices of raw materials, steel and cement, could cast a shade on the construction cost of highways as well as real estate projects. In case of roads, a majority are being built on bitumen, therefore, there won't be an impact on costs but as far as bridges are concerned there will be a huge impact because they are built on cement and steel. The Ministry of Road Transport and Highways charge a 10x toll rate for major bridges and structures under its tolling policy. According to estimates, the current cost of road construction per km for Bharatmala is ₹15- 20 crore. This suggests an average cost of ₹150-200 crore a km. However, some experts say the structure costs vary widely, depending on design choices. Bridges could be cable ones or vary, depending on terrain like those in the Himalayas, where costs are very high.

Jagannarayan Padmanabhan, director and practice leader (transport & logistics), CRISIL Infrastructure Advisory, said, "Infrastructure and road projects would be at various stages of construction as such for a project which is in its early stage of construction the impact would be higher and this would be in the range of 10-15 per cent." Not just road projects, real estate projects are staring at cost escalation. MD, Hiranandani Communities, Niranjan Hiranandani informed that construction costs have gone up 4-5 per cent due to rise in steel and cement prices. Some realty companies, however, say the impact would not be much.

Kamal Khetan, the chairman of Sunteck Realty, said, "Since their selling price is ₹15,000 to ₹18,000 per square feet, an increase of ₹100 to ₹150 due to the increase in steel and cement is not an issue for them." The price of steel is estimated to have gone up to ₹65,600 per tonne from ₹35,000 last year while the cement price has increased to ₹420 a bag from ₹280. According to an India Ratings report, domestic hot-rolled coil (HRC) prices in Mumbai of 2.5- 8mm grade increased by 17 per cent month-on-month and 66 per cent year-on-year in mid-April 2021 to ₹63,400 a tonne. Domestic flat steel prices have increased due to bullish trends in the global HRC market and strong end-user demand. High export realizations and a low risk of imports over the near term are likely to keep prices high. However, prices could face temporary headwinds due to the second wave of the pandemic.