Realtors plan to increase unsold, under-construction apartment prices in Mumbai region

Realty developers across Mumbai Metropolitan Region (MMR), the country’s largest and most expensive property market, are planning to increase prices of unsold inventory that is currently under construction by 10-15% to cover the surge in input costs.

The move is not only expected to impact over 2,773 projects that were approved by Municipal Corporation of Greater Mumbai (MCGM) in 2021 but many more to the extent of 2,60,000 residential apartments over the next three years.

Real estate developers’ apex body in the state, the CREDAI-MCHI, is planning rigorous measures to control the rising input costs that have pushed the cost of construction up by Rs 400-600 per sq ft in the affordable and mid-income housing segment.

The sharp increase in input cost prices has impacted the developers nationwide negatively as the pressure continues to pile on.

In the backdrop of escalating prices of key input materials including cement and steel, realty developers in Maharashtra and National Capital Region have already stated that they are planning to stop purchasing raw material and pause the construction activity at their ongoing sites.

Realty developers in Mumbai Metropolitan Region have not stopped the construction work in the state as yet, but CREDAI-MCHI will consider doing so if other ongoing measures do not provide necessary respite.

“All members of CREDAI-MCHI are aligned towards not halting any construction activities which may cause delays to the ongoing projects and negatively impact the buyers. However, it is worth noting how prices for cement have increased by more than Rs 100 per (50-kg) bag while steel prices have rocketed from Rs 45,000 per metric tonne last year to Rs 85,000 per metric tonne now,” Boman Irani, president, CREDAI-MCHI.

According to him, most projects specially in the affordable segment have small margins of 10-15%, the surge in the cost of raw materials has led to a cumulative increase of over 15% in construction costs in delivering the same projects and consequently has led to projects becoming unviable at present sale values. Hence increased costs will eventually have to be passed down to the buyers for projects to become financially viable to sustain for a lot of developers.

Prices of key raw materials including steel, cement, aluminium, PVC have risen sharply between 30-100% during the last year itself. In the backdrop of the Russia-Ukraine war situation, rising cement and steel prices along with the rise in prices for fuel, have turned into one of the main points of concern for realty developers across the country.

A recent CREDAI-MCHI study, which drew insights based on the analytics of MMR housing scenario, foresees a 7-8% price rise over the next 12 months if the quarterly rise of 2% price hike continues into the current year.

Developers expect prices will rise much more in the coming quarter given the current disruptions in Russian and Ukrainian businesses as well as daily increment in fuel prices, this could lead to an impediment to the growth of the sector. CREDAI has urged the government to continue showing promising support to the industry and intervene in price escalation.