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A rapid increase in the prices of building and construction raw materials in the past several years has resulted in the increased total cost of construction. Many construction activities are slowing down as the builders and contractors face budget issues. According to a recent study conducted by the Confederation of Real Estate Developers’ Associations of India (CREDAI), there has been an increase of 35 to 40 percent in the cost of raw materials before and after the pandemic. Approximately 250 raw materials are used in the building construction, including cement, structural steel, reinforcement steel, bitumen, sand, concrete, ready-mix concrete (RMC), binding wires, fly ash, construction aggregate, bricks, blocks, fixtures, and timber.
Severe fluctuations in raw materials prices have been observed since last October owing to the factors such as the Russia-Ukraine conflict, power crisis, coal crisis, and increase in fuel prices. For instance, the prices of raw materials such as steel, cement, and sand that are used in the primary stage of construction, increased by around 30% to 70% from March 2020 to October 2021. Similarly, prices of bricks, aggregate, and ready-mix concrete (RMC) have also increased by 30 to 50 percent. Furthermore, the prices of raw materials generally used in the later stages of construction, such as electrical cables, fabrication, plumbing, glass panes, wood for flooring, unplasticized polyvinyl chloride (UPVC) windows, walls, and doors, have increased from 10 to 65 percent.
Recently, there was a marginal reduction in the price of a few raw materials because of the reduction in fuel prices. In June 2022, approximately a 5% drop in the price of main raw materials, steel and cement, are notable examples. While steel prices have significantly declined, the prices of other materials such as blue metal are stable, and prices of hardware & PVC products remain high. This, in turn, increases the overall construction cost, and customers & promoters working on low to medium-budget houses will be affected by these prices. Increasing raw material prices indirectly raises the property cost by approximately US$6 per square foot.
The government at the state or central level should regulate raw materials prices to address this issue. In June 2022, the Builders Association of India (BAI) raised the issue of an increase in raw material prices with the central government. The minister of housing and urban affairs has assured the BAI to resolve the issue as the size and contribution of the construction sector to the country’s Gross Domestic Product (GDP) is large. To combat the scarcity of soil, many construction workers use manufactured sand (m-sand). Since private owners determine the price of m-sand, many workers from different parts of the country seek help from the government to either regulate the prices or distribute raw materials such as crushed stones and m-sand.
Ways to mitigate the high prices of construction raw materials:
Key companies operating in the building materials space in India are UltraTech Cement, RDC Concrete (India) Pvt Ltd, BASF SE, Visaka Industries Limited, Amulya Mica, Brilloca Limited, Zoloto Industries, Yojak, and Shankara Building Products. Many companies are actively conducting research and development activities to discover new advanced building materials.
More than advanced building materials, builders are looking for alternative construction technologies that can be adapted in the Indian construction sector to reduce the impact of raw material prices. Emerging technologies in the construction sector are 5D Building Information Modeling (BIM), modular construction, virtual reality, pre-fabricated structures, climbing formworks, 3D printing, construction robotics, and offsite construction. Increasing technological innovations in the construction industry coupled with the rising adoption of advanced building materials by builders are positively impacting the Indian construction industry from a short to medium-term perspective.
To know more and gain a deeper understanding of the construction market in India, click here.
