Guwahati, April 4: Residential apartments in Assam are set to become more expensive post Bohag Bihu.
The Assam Real Estate and Infrastructure Developers Association (AREIDA) has decided to increase price of all apartments by Rs 600 per sq ft of constructed area from April 20, 2022, to make up for the 37.50 percent escalation in the average cost of construction material and labour, during the past two and a half years.
Addressing mediapersons here on Monday, AREIDA president P.K. Sharma claimed that the sharp escalation in costs (from October 2020 till date) of construction material, has eaten into the margins of realty projects and rendered them unviable.
“Affordable housing in particular is now impossible. The developers are faced with this alarming situation and have no choice but to take drastic measures to survive. The revenue generated from the projects will not cover even the cost of construction given the fact that prices on actuals have risen by Rs 600 per sq ft since October 2020,” Sharma said.
Currently, the cost of key material such as steel and cement has gone up with vendors citing global supply chain disruptions owing to the war in Ukraine.
“After COVID-19, the current crisis (in Ukraine) is a dual blow on real estate developers as they are finding it impossible to deliver projects within the projected timelines and costs. For steel particularly, the situation is so bad that suppliers are not willing to take orders even at elevated prices,” he said.
All construction works, whether Prime Minister’s Awas Yojna or infrastructure projects of the government, are being severely impacted, the association informs.
“While prices of unsold inventory can be increased, we are stuck where flats have already been sold. Unless the escalation on actuals is allowed we are looking at the next wave of stalled and unviable projects,” Sharma said.
The prices of steel, cement and other construction materials have been rising steadily over the last two and a half years.
“These have now skyrocketed to a level beyond the affordability of all developers. As an immediate measure this association, during an emergent general meeting on March 26, 2022; decided to increase the price of all flats by Rs 600 per sq ft with effect from April 20 2022, to cover the increased cost of construction,” he said.
While no one can correctly predict the future cost over the project period, Sharma said that it was imperative to have an escalation clause in all sale agreements for the survival of the project, as the current situation has clearly established.
“The RERA Act 2016 did not restrict an escalation clause in the builder-buyer agreement. However, the State RERA Rules imposed a draft agreement with a mandatory no escalation clause. There have been several judgments in the meantime, which have decreed that the Rules can, under no circumstances, override the Act,” the AREIDA president pointed out.
The Supreme Court has also directed the central government recently, to frame a national buyer-builder agreement applicable across the country.
“We are pressing hard for the inclusion of an escalation clause in the builder-buyer agreement where escalation, based on actual figures, must be factored in. All concerned must understand that if a promoter is rendered bankrupt due an abnormal situation, it will be impossible for him to complete the project and this can never be in the best interest of the buyer,” Sharma said.
“We are also applying to the RERA authorities for an extension of the project completion period by six months as projects across the state have been disrupted owing to this abnormal increase in cost,” he said, while seeking cooperation from purchasers for the survival of the ongoing projects.