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adProperty News

Recession restores confidence in buyers
Source : The Hindu Property Plus Published On : 2009-03-10 City : Chennai

Steady drop in prices of cement and steel, there is promise for lower and middle income group, writes Hema Vijay

Much to the relief of the home buyers, 2008 has seen a fall in prices of materials leading to drop in construction costs. It looks; economic down turn has thrown up an opportunity. With the cost of labour and price of land also coming down, many hope that the housing could now get within the reach of lower and middle income groups. What is now required is intelligent utilization of the situation and careful planning.

Material hope

Prices of steel and cement are coming down, because of demand supply dynamics, with demand now at a low the world over. “In 2007, it was Rs. 23/kg; it went up to 48/kg in 2008, and we had to purchase steel at the peak rate because of ongoing projects”, points out M. Ganesan, a building trade professional. “The price of steel has now come down to around Rs. 33/kg from its peak of Rs. 60 four months back”, says Sapp any Pillai, Vice Chairman, Institution of Valuers. This means that products like hinges, GI pipes grills, etc too would come down. The price of steel is expected to fall even further.

And with lowering petroleum prices, the cost of PVC products too is expected to fall. As for bricks, Sapp any Pillai points out, “The cost of bricks started at Rs. 3.75 in the beginning of 2008, but hovered around the same rate (at Rs. 4 to 4.25 per brick) throughout most of last year, and has reached a stand-still now”. After the rain, the cost of bricks would come down further, he says. Cement remained relatively stable at between Rs. 260-275/bag last year; but cement prices are expected to fall this year because of lack of demand. The cost of sand didn’t change much throughout last year and stood at Rs. 18-20/cubic foot. Likewise, blue metal, glass and wood didn’t see much of a cost fluctuation last year.

Because of the meltdown, engineers and skilled workers would be available at reduced salary they had charged six months back; workers who had charged Rs. 300-400 a day would now be available at Rs. 200 a day. And since labour costs contribute as much as 30% of the total construction costs, this is a highly significant factor. In all, the cost of construction has dropped by Rs.100 to Rs.150 per sq.ft, says Mr.Pillai. Baring a few areas within the city, land price can also be expected to fall by 15 percent, adds R. Kannan of the Infratech Infrastructure Services. It looks the cost of finished housing should soon become affordable to many.

New technologies

“Surplus skilled laborers could be absorbed by the building industry to construct houses with state of art technology, that take less time and consequently incur less cost”, suggests R. Kannan. For instance, the pre-fab and pre-cast houses, which were not taken up on a large scale earlier, because of shortage of skilled laborers qualified enough to handle the technology.

Pre-fab houses indicate houses whose frames are fabricated elsewhere and assembled on site, along with board-walls of cement and gypsum-concrete. Pre-cast houses use aerated and light weight concrete, which are cast elsewhere and moved to the construction site. Pre-cast and pre-fab construction is the trend worldwide now, though it hasn’t caught on much in India so far, with the exception of commercial structures like factories. Now, with a skilled labour pool available, the housing sector could take advantage of this technology.

This technology will work well in large scale housing, because with volumes, the economy of scale would be accentuated.

These pre-fab and pre-cast structures also have a green charm to them because they consist of more of material like fly ash and gypsum (which is a waste product of the fertilizer industry) and less on cement. And since such houses can be built in a quarter of the time it takes for building in the conventional style, it makes the construction faster, and consequentially, all the more economical.

As Gopinath Rao, former president, National Institute of Valuers muses, “Hard times are ahead in the construction industry”. But every challenge holds out an opportunity too. While the impetus last year came from the premium segment of housing, this year, affordable housing could hog the show, provided the design is frill-free and sensible.



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