Real estate associations Credai and Naredco have praised the government’s efforts to lower steel and cement prices, expressing optimism that manufacturers will extend these benefits to consumers. Both groups have consistently raised concerns about the steep increase in steel and cement prices over the past year, leading to a surge in overall construction costs. Numerous builders responded by raising housing prices to offset the rising construction expenses.
The government’s recent decision to waive customs duty on key raw materials, such as coking coal and ferronickel used in the steel industry, has been lauded by Credai and Naredco. This move is expected to reduce costs for domestic industries and subsequently lower prices. Importantly, the government has increased export duty on iron ore by up to 50%, and on certain steel intermediaries by 15%.
Harsh Vardhan Patodia, President of Credai, welcomed the government’s intervention, highlighting its impact on controlling inflation and stabilizing the real estate sector, which faced disruptions due to raw material price inflation. He emphasized that reduced import duties on steel products should bring relief to all stakeholders. Furthermore, Patodia sees the reduction in import duties on iron ore and steel intermediates as enhancing the availability of raw materials, cooling off steel prices, and benefiting consumer sentiment.
The assurance from the finance minister to improve logistics and facilitate domestic availability of cement, along with lowering custom duties on coal products used in cement production, is seen by Patodia as having a positive impact on cement costs. Additionally, he emphasized that reducing fuel taxes to pre-COVID levels will alleviate transportation costs, benefiting industries and consumers alike. Looking ahead, he suggested that state governments should consider reducing state duties on fuel to directly address inflation.
Patodia expressed hope that manufacturers would pass on the price cuts to end-users, which would assist real estate developers in offsetting increased construction costs over the past two years, ultimately benefiting prospective homebuyers.
Ramesh Nair, CEO of Colliers India, acknowledged the pressure on developers to raise prices due to double-digit increases in construction material costs. He sees the government’s timely intervention in rationalizing duties and taxes on key inputs as likely to have a positive trickle-down effect on end consumers.
Naredco President Rajan Bandelkar echoed similar sentiments, stating that the measures to reduce import duty on iron and steel raw materials and improve cement supply should help control inflation and soaring real estate prices. He emphasized the need for complementary steps, such as GST rationalization on cement, a significant part of construction expenditure.
In a recent announcement, Finance Minister Nirmala Sitharaman detailed measures to calibrate customs duty on iron and steel raw materials and intermediaries to reduce their prices. Import duties on certain steel raw materials will be reduced, and export duties on some steel products will be imposed. The government is also taking steps to improve cement availability and reduce its cost through enhanced logistics.