Real Estate on the high rise again

Real estate companies are recovering their pricing power as the stock of unsold houses trends down and building costs, substantially steel and cement, keep climbing. The industry has been petitioning GoI to regulate prices, reduce taxes and allow easier significances of chief construction materials. Now, the leading developers have begun to pass the added costs on to buyers, in some cases by over to 10 of the price of a house, and they aren't reporting any adverse effect on sales. The surge in oil prices, once GoI permits its pass-through to domestic energy consumers, will add to the cost pressure in construction. Transporting accoutrements constitutes nearly a fifth of the charges in building new apartments, which have formerly witnessed a 13 escalation in construction cost on account of steel and cement.

House prices in India have stayed fairly stable during the pandemic. This has been backed by low interest rates and an industry that has curbed the surpluses of the former real estate smash. The sector is on an upcycle with the pipeline of launches surpassingpre-pandemic situations. Incomes have been outpacing property prices for times, improving affordability. Construction nationwide contracted during the October-December quarter from the same period a year ago as the third wave played out, but is expected to post a smart recovery in 2021-22.

The housing market can absorb orderly price escalation. But a sustained cost push through expensive energy could ail its recovery. The real estate industry will draw assurance from the role construction, with its enormous employment linkages, is anticipated to play in GoI's capex push. The sector's appeal to reduce material cost pressures can be expected to find a sympathetic audience among policymakers. 

By LNN (Liyaans News Network)