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Realty Prices Set To Skyrocket, Devlopres Warned Imminent Hike In Prices Of Residential Apartments

By Nishant, Section Real Estate
Posted on Thu Aug 07, 2008 at 12:15:03 AM EST

Real estate developers in the city have warned of an imminent hike in the prices of residential apartments to offset the sharp rise in construction cost.

Developers affiliated with the Bengal chapter of Confederation of Real Estate Association of India (Credai-Bengal) said if raw material prices held firm, apartment prices would rise by Rs 100 to Rs 500 a square feet. But if steel producers decide to raise prices to international level this month-end, the revision could be as steep as Rs 600 to Rs 1,000 a sq ft.

"There is no alternative but to raise prices. The price at which flats were sold a year ago have now become the construction cost. On an average, project cost has gone up by 43%. Some developers are on the verge of shutting shop," Credai-Bengal president Pradeep Sureka said on Wednesday.

If the cost escalation does take place, it will be a double whammy for buyers as firming of interest rates on home loans has reduced borrowing capacity and forced many to postpone their purchase plans. Home loan offtake is down by 20-30%. Pawan Agarwal, director of NK Realtors, confirmed the slowdown.

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In the past 12 months, real estate price in Kolkata has already appreciated 10-20%. If developers do rise prices, a one-bedroom apartment could become dearer by Rs 40,000 to Rs 200,000, while a two-bedroom flat would cost Rs 75,000 to Rs 375,000 more.

If steel prices are jacked up from Rs 45,000 a tonne to Rs 48,000 per tonne, the cost escalation for a single bedroom apartment would be Rs 240,000 to Rs 400,000 and two-bedroom by Rs 450,000 to Rs 750,000. At present, average construction cost is Rs 1,800 per sq ft while average land cost is Rs 600 sq ft. The average selling rate that is Rs 2,600 per sq ft now, could go up to Rs 3,600 per sq ft.

Ruling out a Mumbai or Delhi-like price correction in Kolkata, Credai national vice-president Santosh Rungta said unlike other metros where land cost was 70-80% of apartment price, it was the opposite in Kolkata.

"No developer is taking up large plots of land right now. A huge demand exists but it is in affordable housing sector. For houses to be relevant to that segment, government has to offer relief by slashing taxes, levies and duties that currently amount to Rs 700 a sq ft," Credai executive committee member Sushil Mohta said.

Source: Times News Network 07/Aug/2008

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