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NEW DELHI: Post the hike in cement prices across India, builders have opined that the trend will weaken the already slow demand for affordable houses as well as impact retail consumers, large-scale construction projects and infrastructure projects. Last week, cement majors in India announced a hike in prices in the range of Rs 10-15 per bag in North India, Rs 30-40 per bag in Central and East India, and Rs 20 per bag in the Western region.
The move comes after a prolonged period of decline in cement prices for five consecutive months due to weakened demand. Builders say hike in the prices of cement will further weaken the demand for affordable houses. “Affordable Housing has already seen a downturn. The increase in cement prices may make housing in this area unaffordable. Infrastructure contracts in future will also see a cost escalation,” says Niranjan Hiranandani, Chairman, National Real Estate Development Council.
Several others in the industry feel higher cement prices will impact consumer sentiments and also impact infrastructure projects. “The price hike will affect retail consumers, large-scale construction projects and infrastructure projects. The factors contributing to the recent price hike include the rising costs of raw materials, power, transportation, and the increased demand for cement” says Jatin Shah, Chief Technical Officer of Project Management and MD, Technical Advisory Services, Colliers India.
Shah further said that “Builders may need to reassess their budgets since every 10 rupee increase in cement price has an impact of 4 to 5 rupees on the construction cost. As such, they need to build in this as a factor into their project estimates or sale price”. India is the second-largest producer of cement in the world and it accounts for more than 8 per cent of the global installed capacity.
As per Crisil Ratings, the Indian cement industry has added nearly 80 million tonnes (MT) capacity in FY24, the highest in the last 10 years. Driven by increased spending on housing and infrastructure activities, cement consumption is expected to reach 450.78 million tonnes by the end of FY27. The ramifications of the price increase will be felt throughout the construction sector, impacting retail consumers, large-scale construction projects, and infrastructure initiatives alike.
Experts say various factors have contributed to the recent escalation in cement prices. These include the rising costs of raw materials, power, and transportation, coupled with an increased demand for cement in the market. The abrupt price hike in cement, a fundamental component of construction activities, underscores the challenges faced by the industry amidst evolving market dynamics. Builders and stakeholders are now tasked with navigating these price fluctuations while ensuring the continuity and viability of ongoing and future projects.
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