Following the recent increase in cement prices nationwide, builders anticipate a detrimental effect on the already sluggish demand for affordable housing, as well as potential impacts on retail consumers, large-scale construction projects, and infrastructure endeavors.
Major cement manufacturers in India announced price hikes ranging from Rs 10-15 per bag in North India, Rs 30-40 per bag in Central and East India, and Rs 20 per bag in the Western region last week. This decision follows a prolonged period of declining cement prices over five consecutive months, attributed to weakened demand. Builders express concerns that the elevated prices of cement will further dampen the demand for affordable housing.
“Affordable Housing has already seen a downturn. The increase in cement prices may make housing in this area unaffordable. Infrastructure contracts in future will also see a cost escalation,” says Niranjan Hiranandani, Chairman, National Real Estate Development Council.
Many others within the industry share the sentiment that elevated cement prices will not only affect consumer sentiments but also have repercussions on infrastructure projects.
“The price hike will affect retail consumers, large-scale construction projects and infrastructure projects. The factors contributing to the recent price hike include the rising costs of raw materials, power, transportation, and the increased demand for cement” says Jatin Shah, Chief Technical Officer of Project Management and MD, Technical Advisory Services, Colliers India.
Shah further said that “Builders may need to reassess their budgets since every 10 rupee increase in cement price has an impact of 4 to 5 rupees on the construction cost. As such, they need to build in this as a factor into their project estimates or sale price”.
India holds the position of being the world’s second-largest cement producer, constituting over 8 percent of the global installed capacity.
According to Crisil Ratings, the Indian cement industry has witnessed a significant addition of nearly 80 million tonnes (MT) capacity in FY24, marking the highest expansion in the past decade. Driven by heightened expenditure on housing and infrastructure ventures, cement consumption is projected to reach 450.78 million tonnes by the conclusion of FY27.
The repercussions of the price surge will reverberate throughout the construction sector, impacting retail consumers, large-scale projects, and infrastructure initiatives alike. Experts attribute the recent spike in cement prices to several factors, including escalating costs of raw materials, power, and transportation, alongside heightened demand for cement in the market.
The sudden upsurge in cement prices, a vital component of construction activities, underscores the challenges confronting the industry amid evolving market dynamics. Builders and stakeholders face the task of navigating these price fluctuations while ensuring the continuity and viability of ongoing and forthcoming projects.
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