Construction costs & escalation clauses – Credai
Reports from the construction industry indicate that the cost of constructing new buildings have increased dramatically in the last one year or so.
Cost of steel has doubled in the last one year to about Rs. 60,000 a tonne. Similarly, cement prices are continuously rising and so are sand prices. Of course, labour and transport are also much more expensive. All this adds upto what is described below.
Just an year back, overall construction costs were only about Rs. 1250 per sq ft. (itself quite high compared to previous years) then it increased to Rs. 1400 per sq. ft. about six months back. Now in the last few months, it has hovered between Rs. 1650 and Rs. 1800 per sq. ft.
Large projects can take years to complete, during which such cost increases can eliminate margins of the builders. So Credai (Confedaration of Real Estate Developers Association of India) is likely to insist on inserting escalation clauses to cover such increases in future.
Translation – buyers will have to pay for these increases in future. Trust the builders to pass on these cost to the end users, who as usual have no real say in the matter.
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