By Piyush Pandey | Date: Aug 12, 2021
The construction costs have been steadily increasing and thereby the woes of the developers too. Let’s see how:
- Price of TOR Steel has increased from ₹55,000-₹60,000 per ton to ₹64,000-₹73,000 per ton
- Price of Structural Steel has increased from ₹65,000-₹70,000 per ton to ₹80,000-₹90,000 per ton
- Price of Cement has increased from ₹350-₹400 per bag to ₹440-₹460 per bag
- Price of M-Sand has increased from ₹1,200-₹1,300 per ton to₹1,300-₹1,700 per ton
- Cost of a lorry load of river sand has exceeded ₹1 lakh
- Plywood cost has gone up by 20%
- Solid concrete blocks, bricks, plumbing and sanitary ware prices gone up but marginal hike in paint
- Piping and insulation material prices gone up by 15% due to increase in resin and polymers prices
- Cost of construction of greenfield and interior fit-out projects gone up by 5-6% due to Covid-19 crisis
Source: https://www.thehindu.com/news/national/karnataka/construction-costs-hit-the-roof-as-raw-material-prices-shoot-up/article34984522.ece by Sharath S. Srivatsa on June 26, 2021 12:27 AM | https://www.financialexpress.com/money/rising-cost-of-raw-materials-may-hit-realty-growth-hike-property-prices/2261290/ By Sanjeev Sinha on May 29, 2021 1:26 PM
Impact on Developers
- Prices of properties cannot be increased since RERA enforced and if new project details submitted
- Managing budgets under control and delivering a quality but profitable product
- Increasing difficulty in absorbing the input price rises of various items
- Delays in purchase, distribution and onsite storage issues due to traditional buying patterns
- Project estimates increase by 40% due to delay in project completion, additional interest paid on loans and rising cost of construction
5 Ways to manage construction material costs
1 Align & team up early in the project
Involving key project stakeholders early in the project helps identify crucial dates, understand material requirements & procurement lead times so as to proceed more quickly, avoid expensive and time-consuming redesigns later in the project
2 Improve planning & scheduling of works
Project planning and schedule preparation using the Last Planner system helps grasp short term & day by day requirements keeping weather forecasts, storage & handling in consideration helps mitigate procurement risks in the execution stage
3 Eliminate waste from processes
Applying Lean thinking will help people find the waste in process and mitigating risks like early or later order placement, shortages, poor material storage & handling etc by solving root causes to create simpler work standards for people ie internal customers
4 Partner with contractors & suppliers
Partnering with contractors & suppliers to find win-win solutions like setting indexed price points with caps, with an approach sharing savings or cost overruns, prompt payment and properly structured contracts help manage the risks to cash flow
5 Explore substitutes or alternate materials
From foundation, superstructure to interiors, use of pre-cast or ready-mix concrete, prefabricated parts and other alternatives can prove useful in expediting the process, limiting material waste, lowering labor & project costs