Real estate companies are increasing their pricing as inventories of unsold homes dwindle and construction costs, primarily steel and cement, continue to rise. The industry has called on the government to regulate prices, reduce taxes and facilitate imports of essential building materials.
Today, major developers have started to pass the additional costs on to buyers, some up to 10% of the house price, and report no negative impact on sales. Rising oil prices will increase construction cost pressures once the government allows its transfer to domestic fuel consumers. Material handling accounts for nearly a fifth of construction spending on new homes, which have already seen a 13% increase in construction costs due to steel and cement.

House prices in India have been quite stable during the pandemic. Low interest rates and an industry that contained the excesses of the previous housing boom contributed to this. The sector rebounds as the launch pipeline exceeds pre-pandemic levels. Incomes have outpaced house prices for years, improving affordability. Nationwide construction activity contracted in the October-December quarter from the same period a year ago when the third wave was unfolding, but is expected to rebound smartly in 2021-22 .

The housing market may face an orderly rise in prices. But continued cost pressures from expensive energy could hamper its recovery. The real estate industry will be convinced of the role that the construction industry, with its huge labor ties, will play in boosting investment in the Indian government. The industry’s call to ease material cost pressures should find a supportive audience among policymakers.

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