Real estate sector to be hit as construction costs up 18%

The increasing construction costs are expected to hit the real estate sector,says PropEquity.

The increasing construction costs are expected to hit the real estate sector,says PropEquity,an online data and analytics search platform covering the Indian real estate industry,in a recent study.

“Taking into account price increase of the four key construction components – steel,cement,labour and bricks – there is an 18 per cent gross rise in construction cost over the last 2 years (2011 over 2009). This escalation will corrode the profit margins significantly,” PropEquity study says.

The impact of increased delivery commitment along with escalating costs will affect the delivery of residential units on time. It is estimated that delivery of 480,000 residential units across affordable,mid and luxury housing segments,scheduled for completion during 2011-13,will be delayed in the 11 cities,the study says.

As a result,developers are likely to lose interest in projects,making delays in project execution inevitable,it adds.

PropEquity has conducted an extensive study of the construction delays in real estate projects and the impact on the industry. Data points covering over 10,000 projects being executed by over 1,500 developers across 11 cities in prime residential locations have been studied to arrive at the trends contained in the research report.