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Crisis hits home: Builders could raise prices

An unlikely casualty of the Russian-Ukrainian war could be India’s housing industry – and soaring energy costs are the culprit. As oil prices top triple digits in dollar terms for the first time since 2014, the housing industry faces the challenge of dealing with soaring input costs. The question is: can they pass on the increased costs to end consumers?

“Oil prices have continued to rise over the past two months on concerns about global supply chain disruptions amid the crisis,” said Harshvardhan Patodia, president of the Confederation of Proponents Associations. Real Estate of India (CREDAI). “Furthermore, the surge in oil will further impact Indian cement manufacturers who were already under pressure from rising raw material and energy costs.”

He expects cement companies will inevitably have to pass on the burden of this cost push, as more than 60% of their business is directly or indirectly tied to crude prices.

Niranjan Hiranandani, National Vice President, NAREDCO, also pointed to the link between the likely rise in property prices and rising costs of raw materials used for construction.

“Rising fuel prices are impacting supply chains and the logistics cost of raw materials, leading to escalating construction costs. This further adds to the woes of India’s already beleaguered real estate.”

While developers believe they may have to raise house prices, they expressed an inability to specify the quantum or range as the situation continues to be fluid. The final decision will depend on the duration of the conflict.