Homebuyers should brace for more price hikes if the increase in raw material rates continues unabated. Developers across India have already taken a price increase of 6-7% for residential projects, and another 5-8% hike is likely in the coming days, with the total increase remaining in the range of 10-15%.

Harsh Vardhan Patodia, president, Credai told reporters that the developers have withheld price increases in the last two year and absorbed the increasing raw material costs, however, the situation is becoming worrisome now. “Going forward there will be moderate price increase in housing segment of real estate,” he said. The impact on affordable housing is being felt the most, he added.

While the developers have refrained from slowing down work so far, Patodia said that the possibility cannot be ruled out if the price increases continue. However, he denied that developers will stop work or go on strike on this matter. In a survey conducted by Credai across 1,850 members, 65% have said that they foresee more than 10% rise in sale prices as 78% of respondents said that cost of construction has increased by more than 20% due to the recently continuously rising building material prices.

Nearly 40% of the industry body members have said in the survey that they will not be able to sustain and deliver the project if no immediate measures are taken to provide relief, while 46% anticipate a delay in delivery of projects. A large number of developers, about 66% have said that they feel forced to temporarily stop procurement and shut construction sites if no solution is available immediately.

Boman Irani, president elect, Credai said that 63% of the members surveyed are from from tier two and three cities which are bearing the brunt of raw material price increases the most. “The percentage increase in input prices has been almost 30% and the margins for the developers are not that high, so they are not in a position to afford it,” he said.

Seeking government intervention on the matter, Irani said that with real estate being the second largest employer of daily wage earners after agriculture, the continuing price increases will impact their livelihoods in a situation that the construction sector is impacted.

Credai is asking the government to intervene by stopping exports of steel or reduction of import duties on steel to give more supply to the business as well as allow input credit on building materials, incentivise or subsidise customers through stamp duty discount and waivers and keeping interest rates low.

The developers body has also asked RERA Authorities to look into allowing escalation clause in the model purchase agreements with the homebuyers. Pankaj Goel, secretary, Credai said, “It is time to revisit RERA Act and bring in the clause of increase in prices when there is such an abnormal fluctuation in the input costs.”

While RERA Act does not prohibit including escalation cost, but a clarification is needed from the authorities, which is awaited, he said. The developers cannot add such clauses on their own and would require permission of the authorities to do that.

The developers have also sought a six month extension in their delivery timelines from RERA given the current price rise scenario so that the developers can slow down construction till such time that the price increases cool down.