The recent move by the Government of India to reduce the import duty on steel and plastic products, have brought cheers to the real estate community. With inflation level hitting the middle class Indians, experts believe that it was a timely move that can improve the investor sentiment. The government has also focused on improving the cement supplies, through better logistics. The combined effect of these steps, can minimize the impact of an almost 40-45% inflation in raw materials, that both builders and consumers had to pay for previously.
In addition to this, the reduction in import taxes of iron ore and steel, will improve the domestic supplies of raw materials, stabilize the steel prices, and pull down the apartment prices to a normal level. This will improve the consumer sentiment, and buyers can start purchasing properties, in both Tier 1,2 and 3 cities.
Finance Minister Nirmala Sitharaman, tweeted on May 21, that the government is focused on improving the availability of cement, through better logistics that can tame the price rise. She also said that the calibration of duty on iron and steel will reduce the prices and give some relief to the consumers.
The Real Estate developers hailed the move saying, “We are pleased with the finance minister and the government’s intervention to control the rise of raw materials”. They also went on to say that this step will not only improve the buying sentiments, but will be a deciding factor in reducing the overall inflation that has slowed down the growth of the sector in the last 18 months.
As the Indian economy was facing acute stress, owing to the inflationary pressures, the government has also cut the fuel taxes to pre-covid levels. It will minimize transportation cost of raw materials, thereby reducing the pressure on the consumers.
CREDAI, the apex body of all real estate companies India, have issued a statement, saying that they now expect the state governments to reduce the state taxes, as it has a direct link on inflation. The association said that they now expect the manufacturing companies to pass on the benefits to the end users.
Anuj Puri, the chairman of ANAROCK group, was of the opinion that the developers were forced to increase their project prices owing to the growth of steel and cement duties. The company also did a survey, where, they found that around 56 percent of respondents felt that 2022 might see an increase in price.
Researches have found that a price rise of 10 percent will be impacting residential units heavily, while an increase of less than 10 percent will have “moderate-to-low” impact. So, in the current scenario, any increase of 10 percent and above must be taken seriously and all efforts are required to tame it quickly; if kept unchecked, it can touch the sky.
Sunil Furde, who is the president of CREDAI Maharashtra, welcomed the move. He appreciated the prompt move by the Finance Minister and requested construction material suppliers to immediately cut down the prices. Gaurav Gupta, SG of CREDAI NCR went on to add that this high prices were impacting the PMAY houses, that has very low margin.
He expected the prices of steel and cement should drop by 25 percent as currently they are hovering above 40-60 percent. He felt that even though housing prices will not reach pre-pandemic levels, it should be within check for the time being. Furthermore, the cement cartel that often creates artificial scarcity will be looked into and the GST on cement needs to be brought down to 18% from the existing 28%.
The vice chairman of Hiranandani group, Niranjan Hiranandani, has appreciated the government for taking steps to tame the fuel prices and minimize duties on steel, cement as well as improve the supply chain, which he felt would cool down the market. In addition to the above steps, he also pointed out, that the government has notified export duties on 11 iron and steel products, which will make sure that not all production can be exported, making sure that the domestic supply market remains in control.