Customers of homes in the ‘affordable’ segment may face a hurdle at the time of delivery with developers crying foul over a steep hike in cement prices that is threatening to muffle Prime Minister Narendra Modi’s ‘Housing for All’ pitch.
Price of a 50kg cement bag has increased from Rs 250 to Rs 300 in the past two months. Developers in Kolkata say they have information that the price will be hiked further to Rs 350 before June. If that happens, it will raise construction cost by Rs 50 per sq ft, a substantial amount in an affordable housing project where margins are low.
“We will have no option but pass the hike to consumers though we know that it will pinch them hard because some have scraped their entire saving to buy the house,” said Nandu Belani, president of the Bengal chapter of the Confederation of Real Estate Developers’ Association of India (Credai), the umbrella organisation of builders.
Working on wafer-thin margins in the affordable housing segment that Modi had announced in his address to the nation on the New Year’s Eve and was reiterated by finance minister Arun Jaitley in this year’s Budget, developers are wary it may upset calculations and derail several projects lined up for launch.
Credai on Friday accused cement companies of profiteering and said the firms had no reason to go for the steep hike at a time when the housing industry and banks were working towards meeting the government’s goal of ‘Housing for All’ by 2022.
Credai National vice-president Sushil Mohta alleged cement companies had formed a cartel to increase prices. “We are pained by the complaints of unjustifiable jacking up of prices. On earlier occasions, too, the Competition Commission of India had pulled up cement manufacturers for collusive pricing and imposed hefty fines on them,” he said.
Credai officials further argued that the cost of cement production had actually reduced with the government extending various subsidies — like cost of power and coal as well as limestone mines and land — to manufacturers. The balance sheet of most of the cement companies showed profit of around 30% for the December quarter. “We are flooded with complaints and protest mails from members about cement companies jacking up prices,” said Belani.
The cement firms are increasing the price to ensure that when the government asked them to reduce prices post GST roll-out, it would allow them to cut the price by 9% and yet maintain higher profit, sources claimed. While the impact of excise and VAT is currently 27%, the sector will draw a GST of 18%.
With over 350 affordable projects providing 2 million units in the pipeline, he argued that developers needed to contain rising costs to ensure these projects remained on track.