In and around Calcutta, property prices could experience a surge of as much as 15% as city developers consider implementing a collective price hike in response to soaring input costs. However, the potential rise in real estate rates might be moderated by a sluggish market atmosphere.
Pradeep Sureka expressed, "There’s no way we can absorb the entire burden of escalation in the cost of steel and cement, the two basic raw materials in real estate construction. We are engaging in discussions with our members, and prices for new properties are poised for an upward revision in the near future."
With cement prices increasing by 20% and steel witnessing a staggering 40% rise, the recent surge in petroleum product costs has cornered builders, who are now encountering a 20-25% increase in construction costs on pre-sold projects.
Given the prevailing demand slowdown in an inflation-stricken market, coupled with rising interest rates and the looming threat of pricier home loans, real estate developers may struggle to enact a single, significant price hike.
Pradip Chopra of the PS Group, who previously served as secretary of Credai Bengal, posits, "Yes, builders might be compelled to distribute the price increase over multiple installments, given the cautious outlook of consumers."
A meeting among Credai Bengal members is scheduled for next week to deliberate on the potential sale price increase of forthcoming properties. Notably, builders in Bangalore and Pune have already initiated rack rate increases, while Mumbai is expected to follow suit by June 16.
Sureka anticipates price increases for new flats in central city areas to be between 5% and 7%, while in suburbs—where construction costs represent about 80-90% of the project costs, largely due to lower land prices—property prices could appreciate by as much as 10% to 15%.
"Prices are bound to rise, sooner than later, and the LIG and MIG segments would feel the most impact," Chopra concurs. He foresees a rush for price corrections on new projects and unsold inventories as developers strive to recover losses from pre-sold properties lacking escalation clauses.
In this challenging scenario, beyond just cement and steel, escalating labor and contractor fees along with increased transportation costs have exacerbated the situation, highlights Piyush Bhagat of the Space Group. This city real estate firm has already unveiled a 12% hike in the sale price for a housing project located in Belur.
According to the Credai Bengal president, who also leads the Sureka Group, "The extent of the price hike should be determined by individual companies, as product profile and location significantly influence this matter." His firm has reported a Rs 100 per square foot increase in two of its Rajarhat projects.
Currently, approximately 2,500 flats are under construction in central city areas, with an additional 6,000 to 7,000 being developed in suburban locales.