Buying house to become costlier? Here’s how cement price rise will affect the real estate market in India

Several reports suggest that various cement companies in India are poised to increase prices by an average of ₹10-15 per bag. In North India, the prices of 50 kg bags will see a hike of ₹10-15, while the Western region may witness an increase of ₹20 per bag. 

The central and eastern regions are expected to face a more substantial rise, with prices potentially rising by ₹30-40 per bag. This surge in cement prices has raised widespread concerns within the real estate sector, presenting a significant challenge for future market dynamics. 

Experts say that the rise in cement prices will directly impact the cost structure for developers and will alter the pricing landscape for consumers alike.

“The recent surge in cement prices has sparked widespread concerns within the real estate sector. This unforeseen escalation not only burdens ongoing projects but also threatens to delay proposed developments. With construction costs on the rise, developers find themselves under significant pressure. The increased cost of housing projects directly impacts affordability, posing a challenge to the government's ambitious 'Housing for All' initiative,” said G Hari Babu, National President of NAREDCO.

Over the last five months, the cement market has entered a corrective phase, resulting in a steady decrease in prices. Notably, average prices for the March quarter have seen a significant drop of 5-6 percent compared to the preceding December quarter. The most pronounced decreases in prices have been witnessed in eastern and southern regions of India.

“The recent escalation in cement prices presents a big challenge. Not only do our ongoing projects face the risk of cost overruns and delays, but we're worried about passing on these additional expenses to our valued residents. As stewards of senior living communities, we're committed to finding solutions to challenges, ensuring our projects and residents are well-supported,” said Anantharam Varayur, Co-founder, Manasum Senior Living.

Real estate market in MMR at critical juncture

Kamal Shah, Partner at Palladian’s Partners Advisory Private Limited said that the real estate market in Mumbai Metropolitan Region (MMR) is at a critical juncture due to the anticipated hike in cement prices of ₹10-15 per bag.

Despite the surge in activity and demand within the real estate market, the rising cost of cement is expected to impact the sector's momentum. 

“The cost escalation could lead to increased construction expenses, potentially affecting the profitability of ongoing and upcoming projects. Developers in the MMR, who have benefited from strong sales growth, might face margin pressures and could be compelled to adjust project pricing upwards. This situation could test the market's resilience, as higher property prices may alter buyer affordability and sentiment, possibly slowing down the rapid pace of growth observed in the past year,” Shah said.

Shah further highlighted that this could influence future market dynamics, affecting both the cost structure for developers and the pricing landscape for consumers, potentially impacting the region's real estate growth trajectory.