Projects crawl as building materials’ cost soars

A rise in the prices of construction materials like steel, cement, as well as labour charges has hit small and medium builders hard.

The prices of cement have increased 25%-30% to Rs 350 per bag while steel prices rose close to 15% to Rs 45,000 per tonne during the Unlock 1.0 phase as compared to the pre-Covid period.

The shortage of skilled labourers across major metros has resulted in increase in their daily wages by 15%-20%, thus impacting the margins of builders. With migrant workers, especially skilled operators, yet to return to cities, the completion of many housing projects is set to be delayed beyond six months.

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The government and real estate regulatory authorities have given six months' extension to builders to complete their projects.

"Labour strength of 25%-50% is expected to return to work at construction sites during the third quarter of 2020. Most of them are expected to return post-Diwali/ Chath puja in Q4 2020, while the bulk of the labour force are expected to resume work in the first quarter of 2021," Shrinivas Rao, CEO – APAC, Vestian Global Workplace Services, said.

The overall construction cost is being impacted at a minimum of 5% to 10% owing to disruption in the supply chain management and migrant workers leaving cities, he said.

“Prices vary between developers and the pricing depends on supply and demand. We have been facing a shortage of workers as many have gone back to their native places. Transportation is disrupted leading to delay in supply of materials,” S B Sarvesha, Managing Director, Bhadra Group, told DH.

He said the cost of cement, steel and many other raw materials has gone up in the range of 15% to 30% over the last three months. “Small and medium players like us have been hit very hard. Our margins and profitability have taken a big hit as we are paying extra cost for all materials. We also paid extra labour charges to construction workers in order to retain them. Many workers have gone to work with large builders as they paid little more due to shortage of workers,” he said.

As builders are focusing on hygiene and sanitisation at construction sites, administration overheads are likely to increase by 10%, he said.

Many projects are being delayed because of non-availability of skilled workers like masons, electricians and plumbers as well as delay in supply of materials. It will be beyond six months in many projects, Sarvesha said.