REAL ESTATE

REAL ESTATE

Real Estate Sector May Bleed

The country's real estate sector may hit a bumpy road ahead due to increase in the costs of construction. This finding was revealed in a recent study conducted by PropEquity, an online data and analytics search platform that covered the Indian real estate industry. The increasing construction costs has been attributed to price hikes in the four key construction components, namely steel, cement, labour and bricks. "There is an 18% gross rise in construction cost over the last two years from 2009 to 2011. This escalation will erode the profit margins significantly," the study has found.

According to the study, the impact of increased delivery commitment along with escalating costs will affect the delivery of residential units on time. It is estimated that delivery of 4,80,000 residential units across affordable, mid and luxury housing segments, scheduled for completion during 2011-13, will be delayed in the eleven cities. As a result, developers are likely to lose interest in projects, making delays in project execution inevitable.

PropEquity has conducted an extensive study of the construction delays in real estate projects and the impact on the industry. Data points covering over 10,000 projects being executed by over 1,500 developers across 11 cities in prime residential locations have been studied, to arrive at the trends contained in the research report. The cities that were included in the study are Gurgaon, Noida, Greater Noida (north); Mumbai, Navi Mumbai, Thane, Pune (west); Bengaluru, Chennai, Hyderabad (south); and Kolkata (east).