Despite hike in RR rate, builders rule out price cut
Rising costs are forcing builders to keep houses unsold, Naresh Kamath reports.mumbai Updated: Jan 04, 2013 01:59 IST
The government’s decision to hike its ready reckoner (RR) rates across the city is turning out to be a dampener for the already sluggish real estate industry. With prices at exorbitant levels owing to already escalated costs of raw materials and labour, inflated RR rates are only adding to industry woes.
The RR rates form the basis for the calculation of stamp duty and registration of properties, and the new rates have come into effect from January 1. The rise in RR rates, ranging from 5% to 40 %, has caused escalation in project costs as well.
Builders, however, rule out a cut in housing prices. “We will either sell property at the existing high prices or let apartments remain unsold. There is no question of price cuts,” said Paras Gundecha, president, Maharashtra Chambers of Housing Industry (MCHI), the apex body of builders.
Sukhraj Nahar, director, Nahar Group also echoed Gundecha’s sentiments, stating that the last six months saw an exponential increase in construction costs. “We cannot afford to cut prices as cost of raw materials and labour has been very high,” said Nahar.
According to figures given by MCHI, cement now costs Rs300 a bag compared to Rs220 a bag, six months ago. Similarly, steel now costs Rs55,000 a tonne from Rs40,000 a tonne six months ago, and sand costs have doubled to Rs10,000 a brass from Rs5,000 a brass six months ago. Daily wages of labour has also increased from Rs250 (six months ago) to Rs400.
According to Gundecha, one of the main reasons for the hike is the premium being paid by builders to avail the incentives in floor space index (FSI).
Experts say that affordable housing continues to remain a dream. “There is no logic for the rise in prices in the city as construction costs have risen across the nation. Prices will be corrected eventually,” said Pankaj Kapoor, CEO, Liasas Foras, a real estate research firm.