10
May

The factors impacting the prices of your dream home in 2022?

The real estate sector has gone through many mysterious phases like demonetization, withdrawal of GST input credit, the introduction of RERA [Real Estate Regulatory Authority], the Covid-19 pandemic and the latest one to hit the sector is the Russia-Ukraine war. When the industry had barely started coming out of the tumultuous times of last year and had just begun to pick up speed, the prices of many raw materials skyrocketed steeply. A lot of unprecedented factors have restricted a developer’s capacity to maintain the selling prices as well as the potential for providing offers to home buyers. If we talk about our city, Vadodara – the prices for residential or commercial commodities have gone up as well.

With many people constantly asking about the factors that lead to an increment in the price of their dream home, we thought of keeping our clientele well informed. We are studying and honestly admitting that certain hikes as beyond a point cannot be absorbed while compromising on the quality of your biggest asset of life. Today, this blog will try to provide material information regarding the concern.

Russia-Ukraine War: Raw materials are currently tough to procure due to the ongoing war between Russia and Ukraine. The entire world is seeing some kind of turbulence in procurement and formalities, and the scenario has also caused a fluctuation in the demand-supply game in the market. Material can still be procured from other places but the situation has affected legitimacy globally. This has caused an increase in prices and hence the developers aren’t able to bear the same beyond a particular threshold.

Fuel price hike: Fuel is a critical component of the entire construction process, and the prices of the same have been steadily rising since January 2020. Further, the new prices have gone up, which has a considerable effect on the construction industry. Historically, as the cost of fuel climbs consistently, prices of practically all materials and commodities rise. Moreover, the coal shortage has also been the fuel to the fire. Hence, this hike in raw material costs will severely dent the sector’s viability. With the raw material prices going up drastically, all real estate developers have been forced to review and revaluate their sales prices.

Post-Pandemic Era: Due to the economy’s growth, commercial buildings sales in major cities outperformed sales of houses during the pre-Covid years. Though in the new normal, the residential markets are picking up, and there is a slow increase in demand for commercial/office space with options like work-from-home, the requirement of having a stable home, and other practical and emotional reasons. The ease of the pandemic has led to increased demand for materials, further adding to the need for the raw material, and hence the costs are going upwards. The spike in residential projects has led to an increased demand for materials, further disrupting the supply-demand channel.

Sand: Sand as we all know is a key raw material used during various stages of construction. The Enforcement and Monitoring Guidelines for Sand Mining 2020 released by the Ministry included directions to states to carry out river audits, put detailed survey reports of all mining areas online and in the public domain, conduct replenishment studies of river beds, constantly monitor mining with drones, aerial surveys, ground surveys and set up dedicated task forces at district levels. Hence, the tightness in the availability of sand poses a further challenge in terms of pricing.

An increase across the board: Not only steel and cement but other materials like tiles, aluminium, and copper have gone up substantially while property prices have remained stagnant for 5-6 years. While the new project launches will see a price increase, the launched project will also increase in phases in the coming months. Pricing is under extreme pressure in the current market and most developers cannot absorb the same anymore if the selling price stays the same. Builders are assessing the input costs to their best capacity, and if necessary, the prices of flat prices in Vadodara and house prices in Vadodara will have to have risen.

There is a hope that the government may consider rationalizing GST on various construction raw materials from their current rates or consider providing relief by lower duties on finished commodities, as this would bring some evenness to prices of residential and commercial properties. If these steps are not taken immediately, property prices across all segments will continue shooting up, directly hampering affordable housing and housing for all government missions. Homebuyers will have to invest more for their dream house, and this will negate the savings arising from the all-time low housing loan interest rates. If you wish to secure your dream home (i.e. 2BHK flats in Vadodara, 3BHK flats in Vadodara or 4BHK bungalows in Vadodara) before prices go higher, visit us at your earliest convenience!

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