Tuesday, Jun 6, 2023

Cement makers, realty body lock horns

Cement body accuses Credai and BAI of artificially jacking up prices of flats and houses, says they are holding on to prices despite having a margin of more than 100%

By Telangana Today

Published Date - 09:20 PM, Tue - 12 January 21

Cement makers, realty body lock horns — Cement makers’ body has urged the government to break the builders’ lobby and ask each builder to come clean on costing.

Hyderabad: Newly formed Cement industry lobby body, South Indian Cement Manufacturers Association (SICMA), and real estate developers body Confederation of Real Estate Developers’ Association of India (Credai) got involved in a war of words with the former accusing developers and members of Builders Association of India of artificially jacking up the prices of flats and houses.

Giving an analogy to the pricing mechanism of the real estate sector of Hyderabad, SICMA president N Srinivasan said that the guideline value in a high end area is such that cost of land in flat can at best be Rs 1,500 per sqft. Adding construction cost, the total cost of flat would not exceed Rs 4,000 per sqft. “Where is the case for builders selling their flats in those zones ranging from Rs 8,000-10,000 per sqft? he said.

In a letter addressed to the Prime Minister, Srinivasan said Credai and BAI members are holding on to the prices despite having a margin of more than 100 per cent. The cement makers’ body urged the Government to break the builders lobby and ask each builder to come clean on costing and ask them to reduce the price by at least 50 per cent. He pointed out that the selling price has doubled in the last five years. He also stressed the need for taking action against the builders not insisting on payment through a cheque.

The cement manufacturers also alleged that the builders and developers use the bogey of rising input cost, especially of cement, to justify high prices. “They (builders and developers) fail to explain that only half a bag cement is needed to construct one sqft. Cement accounts for just about 1.5-2 per cent of selling price. Even if the price of cement was to go up by Rs 100 a bag, it will just have an impact of just Rs 50 per sqft on the construction cost,” he said adding that Credai and BAI members are flourishing at the cost of buyers.

The unsold inventory in nine major markets is pegged at 75 lakh units. This apart, there are many unfinished flats by builders, putting consumers under huge strain, he said. “Only if builders had cut the price and sold the inventory, we would have seen total revival of realty demand. Middle-class and lower middle-class sections are dying to get a roof on their head, provided it is affordable,” SICMA president said in the letter adding that the builder lobby is not allowing the prices to slide.

V Rajashekar Reddy, General Secretary of Credai Hyderabad, refuted the contention of cement makers that only half bag cement is used for per sqft construction. “We are using Mivan technology and pre-fab structures and as a result the use of cement has gone up several notches,” he said.

“The developer community has taken a decision not to increase the prices and the effort was to come out of the pandemic. However, the cement industry increased the cement prices. The price was around Rs 250 or so before lockdown and that gradually touched Rs 350 and then to Rs 400 once the lockdowns were eased. We have taken this to the notice of Government,” he said. Reddy, however, did not elaborate on other issues raised by the cement lobby group. A questionnaire sent to Credai seeking its stand remained unanswered till this point of time despite attempts to reach them on phone and email.

Cement industry

At 500 million capacity, the Indian cement industry is second in size globally. China at 2.5 billion tonne is on the top. Given the limestone deposits, only seven States can add further capacity. Three States in the south- Telangana, Andhra Pradesh and Karnataka- account for nearly one-third of India’s limestone deposits. “We have potential to become a cement hub for future development across India as well as exports,” said Srinivasan.

However, poor growth of the housing sector is hitting the cement industry. The builder and developer cartels are holding on to the prices. Construction sector has the highest multiplier effect and if ultimate buyers are given flats and houses at reasonable rates, money circulation will increase and boost Indian economy and job creation. This will also spur the demand for cement, an industry which is struggling at 60 per cent capacity utilisation.

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