COIMBATORE: This month, TMT steel prices—a critical component in construction—have surged by 20% compared to last month, leading builders’ associations to express concerns about a potential slowdown in construction activities, particularly in housing projects.
A builder based in Coimbatore noted that steel prices have risen by ₹10 to ₹12 per kg, resulting in higher construction costs than originally anticipated.
The price per tonne has now increased from ₹62,000 to ₹72,000.
While cement and brick prices remain stable, the significant rise in steel costs has forced builders to adjust their project estimates accordingly. This increase equates to nearly ₹50 per square foot. Builders indicate that typical price hikes of around 2% to 5% often occur by the time a project is completed, complicating their credibility with clients. It is worth noting that such price fluctuations are common during the financial year-end.
Builders have accused domestic market manipulations for this price spike and have long urged the central government to establish a dedicated council to regulate and oversee construction material prices. They argue that just as RERA governs and enhances transparency in the construction sector, a government-led council could help manage raw material price volatility, which would ultimately protect both builders’ credibility and consumers from financial stress.
N. Maruthachalam, a Coimbatore builder and engineer, emphasized that small firms, operating on limited resources, feel the brunt of these fluctuations significantly impacting their profit margins. Unpredictable pricing complicates accurate cost projections during the bidding phase.
He elaborated that if prices escalate post-project estimation, justifying the additional costs to clients becomes challenging.
For instance, in a 1,000 sq. ft. project, an increase of ₹30,000 for three tonnes of steel may seem nominal to clients. However, when multiplied across four projects, this could lead to a potential profit loss of nearly ₹1 lakh for the builder, ultimately causing delays or slowdowns in construction.
Recently, steel prices have seen a notable spike. Since steel is a primary raw material in construction, any price fluctuation directly influences overall project costs. This increase is especially burdensome for ongoing projects under fixed-price contracts, as contractors must absorb the additional expenses. It also requires revisions in budgeting and project cost estimates for future endeavors, which may delay client decisions. Currently, the construction sector is closely monitoring these price trends. Should the increase persist, builders may have to implement escalation clauses, renegotiate contracts, and possibly see a slight rise in property prices over time, noted Ramyaa R Senthil, president of the Coimbatore Builders and Contractors Association.
