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Builders Losing on Projects Due to Dipping ROI: CREDAI

Add comment   |   July 1, 2011    08:42am   |Contributed by Indian Realty News

Inflation and rising cost of raw materials have started putting a dent in the balance sheets of the real estate firms here. In spite of bleeding balance sheets and dipping return on investment (ROI), the firms here commit that they will deliver the housing units to the buyers at the booking price itself. KC Naik, president, Mangalore chapter of the confederation of real estate developers’ associations of India (CREDAI), says there is an escalation clause in the agreement with the buyer — but he has not used it till now. His firm Mahabaleshwar Promoters and Builders is currently executing two projects of 260 housing units and will launch another two projects soon.

“We have been in operation since the past two decades and not even once we have used the escalation clause in our favour,” said Naik. His trick is to hasten the completion period of the project when cost of raw materials start going up. “All units are not sold at one go. So the first buyer is the lucky one who will get it at the lowest rate. It goes by Rs 100-200 per sq ft subsequently,” he observed. CREDAI secretary PMA Razak says the ROI is dipping and builders are losing 10-15 per cent on the projects. Razak, whose firm Plama Developers is developing six apartment complexes in Mangalore with 350 housing units, says the firm is committed to deliver the units at the booking price.

In the past six months, the prices of sand, cement, steel and flooring tiles have increased from 20 per cent to 100 per cent. Prices of rough sand, used for construction of slabs, is up from Rs 8 per cubic feet to Rs 16. Fine sand used for plastering has gone up from Rs 9 to Rs 18. Adding to the woes is the scarcity of fine sand. Likewise steel is up by Rs 33 to Rs 40 to Rs 45 per kg and cement from Rs 250 to Rs 310 for a bag of 50 kg. Flooring tiles (vitrified) has also increased from Rs 33 to Rs 38.

News Published Under:   Bangalore, Chennai, Delhi, Gurgaon, Kolkata, Real Estate Developers, Real Estate India | No Comments »



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