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Impact On Real Estate Sector As Cement Price Hikes
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What is cement?
Cement is one of the oldest building materials in the construction industry. It is a fine powder which, when mixed with water, hardens in a few days into a strong and solid material. Therefore, it is widely used for real estate construction projects. However, cement is not all that strong when it comes to supporting its own weight. That’s why a rebar is used before the cement is poured. This makes the cement much stronger and a good construction material.
The demand for cement is in the real estate sector, infrastructure and industry expansion sectors. Out of these, the major demand is from the real estate sector. The real estate sector and cement industry is closely related and any hike in cement prices will directly affect the real estate sector.
Cement manufacturers in India
• ACC Limited, Mumbai
• Ultratech Cement, Mumbai
• Ambuja Cement, Mumbai
• Jaypee Cement, Noida
• India Cement, Chennai
• Ramco Cement, Chennai
• JK Cement, New Delhi
Uses of Cement
Cement is used for the following work:
• construction industry: to build floors, bricks, plaster, columns, roofing, beams, piles, mortar, panels,
• transport industry: to build roads, crossings, bridges, pathways, viaducts, stabilization, runways, parking, sleepers, tunnels
• water: weirs, culverts, kerbing, pipes, drains, dams, pools, canals, tanks,
• civil: silos, warehousing, docks, fencing retaining walls, piers, poles, pylons
• agriculture industry: to build housing, irrigation, buildings, feedlots,
Reason of price hike
Real estate is witnessing a hike in the cement price by over 30% in a month to Rs. 275 for a 50 kg bag. This trend is likely to continue, and may reach Rs. 325 this festive season, making it difficult for builders to construct. This price hike will also impact the common man, as he would not be able to purchase or construct his own dream house. This continuous price rise is affecting the real estate sector. As the cost of construction goes up, sales price would definitely increase and the customers may have to pay more, as costs of all inputs like manual labor and building material have also gone up. In the prevailing market conditions, increase in cement and input cost would harm the interest of business and consumers.
Impact of price hike
Due to the price hike in cement, the construction industry has come to a standstill. As the cement manufacturing companies have increased the price by Rs. 35-65 for a 50 kg bag, the construction cost has increased by a flat 15%. Kochi is one of the most hit areas, as the building activity is on the higher side here. Developers’ apex body Confederation of Real Estate Developer’s Association of India (CREDAI) believes that a cement lobby is active and has demanded an intervention of the government to resolve the crisis.
Cement is a basic raw material for the construction industry and this continuous increase in price has proved to be good for the cement industry as the stock prices of cement companies are increasing.
Major developers in the cement industry feel that the cement price hike would be a dampener for the customers as they will be feeling the brunt of this hike. As per the developers, not only the cement but the price of other construction material are also on the higher side; and in the end, it is the customer who will be on the losing side.
Even though the real estate sector is witnessing a slow down, residential demand is still steady and growing as people need a house to live in.
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