Slowdown In Real Estate Business Due To Hike In Steel Price Article

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Slowdown in real estate business due to hike in steel price

As the dark clouds of an economic slowdown gather over the world, prices of construction materials have started to slide in the city. A few months earlier, prices of key commodities like sand, bricks, steel and wood had reached dizzy heights, now they are in a free fall.

Author: Mahendra Varma

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Sales of all these products have also come down from 25 to 40 per cent. However, the cost and sale of cement cont inues to remain stable even after mounting demand from contractors involved in construction of various irrigation projects across the State. Analysts attribute this to slowdown in real estate business in the State capital as well as in Vijayawada, Tirupati and Visakhapatnam. The meltdown has indeed slowed the construction activity with several Real estate developers hesitating to take up new ventures.

While some of them are only focusing on completing the ongoing projects, others are in a quandary over launching new projects. Steel erodes For instance, the cost of steel had touched Rs.40,000 to Rs.50,000 per tonne a few months ago, while sand and bricks zoomed up to Rs.6,000 and Rs.26,000 per lorry load respectively. These were all-time highs and gave jitters to middle-class families in accomplishing their dream of owning a house. The prices and sales of these products have now tumbled drastically. At present, the price of steel range from Rs.35,000 to Rs.37,000 per tonne, and sand and bricks stood at Rs.5,000 and Rs.18,000 per lorry load respectively. “Steep rise in fuel prices coupled with drop in sales led to the decrease in prices of sand and bricks”, said a supplier Vinay Kumar Yadav in Secunderabad. At least three lorry loads of sand used to be delivered everyday and now it is hardly one lorry load for every three days. “It’s a double blow for us with prices and sales decreasing”, he lamented. With sales of timber also coming down almost by 50 per cent, traders are requesting the government to reduce 12.5 sales tax to four per cent.

“As wood is most commonly used product, we appeal to the government to reduce sales tax to overcome losses”, said Sridhar Malani of Padma Timber Agencies in Bowenpally. Cement prices, however, remain stable. In Hyderabad, the retail premium brand cement range from Rs.230 to Rs.240 per bag and Rs.215 to Rs.222 per bag in Vijayawada. “Cost of the cement did not increase because there has been no substantial rise in its prices in the international market”, said Ramesh Chandro, Managing Director of Coramandel Cements Ltd. Another factor for present ‘precarious’ situation in real estate business is increasing demand for separate Statehood for Telangana region. As the leaders of all the main political parties declared support for Telangana, developers are now adopting a ‘wait and watch’ policy until next general elections. Some of them are not coming forward to develop independent houses into apartments with 60:40 per cent profit in even well developed colonies like East and West Marredpally, Sindhi Colony Begumpet and Sainikpuri.

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Mahendra Varma has 3 years experience in writing articles; he is currently working as web analyst in http://www.maaproperties.com

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Slowdown in real estate business due to hike in steel price