The Confederation of Real Estate Developers Association of India (CREDAI) has urged the Union and State governments to provide immediate relief for the real estate development sector which is suffering from several problems due to the prolonged lockdown.
Members of CREDAI Belagavi demanded immediate consideration of policy measures to provide relief to the crucially important real estate sector. The real estate sector seeks immediate relief for its survival which is not just desirable but rather crucial given its share of the economy. The prime reason is the sudden increase in price of inputs such as steel and cement.
The real estate industry is an important pillar of the economy. It consumes vital inputs such as cement, steel and bricks. Developers provide employment to millions directly and indirectly. The sector is working toward fulfilling the Prime Minister’s goal of providing the citizens affordable housing.
The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is expected to reach a market size of US $ 1 trillion by 2030, up from US $ 120 billion in 2017. By 2025, it is estimated to contribute 13% to the country’s GDP.
The residential housing sector is expected to grow significantly, with the Union government aiming to build 20 million affordable houses in urban areas across the country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) of the Union Ministry of Housing and Urban Affairs. The current shortage of housing in urban areas is estimated to be over 10 million units.
An additional 25 million units of affordable housing are required by 2030 to meet the growth in the country’s urban population.
The gap in dreams to be delivered is large. However, runaway inflation in prices of vital inputs threatens to derail any improvement in sentiment in the real estate sector.
Just since the beginning of this month, domestic wholesale steel prices have seen a hike of 4.5 %-6.2%. Prices doubled in the last one year. Cement prices too have moved higher by more than 50% during this period. The price of diesel has increased 34% year over year, owing to a rise in crude oil prices and an increase in government taxes which will impact freight costs of cement manufacturers.
To top it all, the pandemic has had a devastating impact on the industry in terms of overall demand reduction, delays in project completions due to stoppages as a result of lockdown, reduced earnings for labour and therefore, reduced spending by labour. The impact of these problems has also affected more than the 250 industries that are linked to the real estate sector, including ones such as caterers and small restaurants.
Although the real estate industry is resiliently on a slow path towards revival despite two lockdowns, rising steel and cement prices are shrinking already low margins for real estate developers. If immediate policy measures are not taken, a hike in average property prices will be unavoidable.
Some developers will be forced to, at least temporarily, abandon construction of incomplete projects and cause delay in delivery to customers. Moreover, it will have a domino effect on homebuyers as developers will be forced to hike prices of projects due to this reason.
CREDAI Belagavi president P.S. Hiremath, secretary Harshad Kalagathagi and other office-bearers issued a statement demanding relief measures.
