Property Plus
Coimbatore
As costs shoot up, construction slows down
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Uncertainty looms large as building material costs zoom, writes M. Soundariya Preetha
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—Photo: M. Periasamy
Rough time: Construction costs have spiralled following the steep rise in steel prices.
Consumers who want to build a house are in a fix; builders are cautious; and, those who have already started projects anxiously watch the prices of building materials go up. Steel cost was nearly Rs. 30,000 a tonne in January last year and it went up to about Rs. 35,000 by January 2008. However, in the last three months, the prices have shot up to almost Rs. 50,000 a tonne. Cement price was Rs. 180 a bag (50 kg) in January last year and now it is Rs. 230 a bag. As a result, “New proposals have slowed down,” says G. Srinivasan, chairman of the Builders’ Association of India, Coimbatore chapter.
Cement prices have almost stabilised with imports coming in from Pakistan, China, Bangladesh and Malaysia. But, the steel prices have been moving up and builders are not sure of the future trend. The average construction cost for a quality house is now about Rs. 1,000 a sq.ft. and for commercial buildings it is about Rs. 800 a sq. ft. In the case of industrial structures (normal ones), it is roughly Rs. 600 a sq.ft. If the structure is steel intensive, then the prices can be higher, he says.
Currently, the increase in steel price has only reflected on basic construction cost and the impact on products such as doors, windows, rolling shutters, grills and ventilators will be visible soon. Earlier, steel and cement used to constitute just 20 per cent of the construction cost. Now, it is almost 35 per cent, he points out. Further, with price volatility materials are available only for spot buying. Builders fear that cost of other materials can also go up.
Thus, those who have started constructing a house or an industry struggle with increasing costs as works cannot be stopped mid-way. New proposals have started coming down in the city. “Most of the builders now wait and watch and the worst affected are small-scale builders and Government contractors.” This can also lead to arbitrations between clients and builders. Hence, even small-scale projects should have an escalation clause while costs are finalised.
Mr. Srinivasan says customers should now adopt economical designs that will result in effective use of steel. They should seek guidance from experts and also study the alternatives available.
Builders’ Association has appealed to the Government to abolish import duty on steel. At present, the total import duty on steel is 25 per cent. By allowing steel to be imported without any duty, domestic prices will stabilise.
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