Inflation has reached 12.98%, posing a significant challenge for realtors in Kolkata to maintain their current price line.
As a result, residential unit prices are expected to increase by Rs 100-500 per square foot later this month.
Construction Costs on the Rise
A Steep Increase Over the Last Year
According to the Confederation of Real Estate Developer's Associations of India (Credai) Bengal, there has been a 25% increase in the construction cost of residential buildings over the last one year.
This increase is almost double the rise observed during the previous year over 2006.
Breakdown of Construction Cost Increase
Steel Prices: Up by 107% in the last two years to Rs 45,500 per ton.
Cement Prices: Increased by 39% to Rs 4,900 per ton.
Brick Prices: Doubled in the last two years to Rs 4.40 per piece.
Historical Context
Construction cost has surged from Rs 1,265 per sq ft in 2006 to Rs 1,811 per sq ft in July 2008, marking a 43% increase.
Quote by Pradeep Sureka, President of Credai Bengal: "Construction cost has increased from Rs 1,265 per sq ft in 2006 to Rs 1,811 per sq ft in July 2008, or by 43%"
Potential Future Price Hikes
If steel companies resume price increases after August, prices could escalate by an additional Rs 500 per sq ft.
Quote by S. Rungta, VP of Credai: "If the steel companies start increasing prices after August, prices could go up by Rs 500 per sq ft"
The Burden of Taxes on Home Buyers
Direct and indirect taxes contribute nearly 27% to the cost of a six-lakh sq ft residential project with 30-40-metre high buildings.
For a property priced at Rs 2,600 per sq ft, a buyer must pay:
Rs 211 as stamp duty and registration charges.
Rs 483 per sq ft in indirect taxes.
Impact on Sales and Upcoming Events
Realtors have witnessed a 30% decline in sales during the first quarter of 2008-09.
The Home Front-2008 property fair, scheduled to open on August 11, will serve as a gauge for customer sentiment.
Quote by Sushil Mohta, Executive Body Member of Credai India: "We have requested Credai members to hold prices till Home Front-2008"
Banking Perspective on Housing Demand
According to SK Goel, Chairman and Managing Director of Uco Bank, housing demand in Kolkata and West Bengal typically picks up after the festive season, following the second quarter.