Rising Costs, Dipping ROI: Mangalore Real Estate Firms' Commitment
Inflation and the skyrocketing cost of raw materials have begun to severely impact the balance sheets of Mangalore's real estate firms. Despite facing significant financial constraints, these firms are steadfast in their commitment to deliver housing units to buyers at the initially agreed-upon booking price.
No Boom Clause Invocation
KC Naik, President of the Mangalore chapter of CREDAI, highlighted that while agreements with buyers do include a boom clause, his firm, Mahabaleshwar Promoters and Builders, has never invoked it. Currently, the firm is executing two projects comprising 260 housing units, with two additional projects set to launch soon.
Strategic Response to Rising Costs
Naik's strategy to mitigate the impact of rising costs involves accelerating project completion timelines. Since not all houses are sold simultaneously, early buyers benefit from the lowest rates, with subsequent sales seeing increases of INR 100-200 per square foot.
The Extent of the Challenge
- ROI Impact: Builders are experiencing a 10-15% loss on projects.
- Raw Material Price Hikes (past six months):
- Rough Sand: INR 8/cubic feet to INR 16
- Fine Sand: INR 9 to INR 18 (plus scarcity issues)
- Steel: INR 33/kg to INR 45/kg
- Cement: INR 250/bag (50kg) to INR 310
- Flooring Tiles: INR 33 to INR 38