Construction Costs Surge Up to 25% Since Iran War
The construction sector is facing a significant challenge due to the Iran War, with costs surging up to 25% due to disruptions in supply chain, labour migration, higher raw material prices, and shortages of key materials.
Causes of Cost Escalation
- Disruptions in supply chain
- Labour migration
- Higher raw material prices
- Shortages of key materials
"Construction costs have risen by over 25% since the onset of hostilities — a pressure that is meaningful and warrants attention. However, the organised sector today is far better equipped to navigate such challenges than it has been in previous cycles,” said Shekhar Patel, President, CREDAI.
CREDAI's Plea to Housing Ministry
CREDAI has engaged with the Union Housing Ministry, seeking appropriate RERA timeline relief to protect both developers and homebuyers.
Industry Leaders' Views
Vikas Oberoi, chairman and managing director, Oberoi Realty, said, "These are stressing us out. But it's a problem for the entire industry now it's slowly starting to hurt you in a way.”
Gaurav Pandey, Managing Director and CEO of Godrej Properties, stated that the cost impact would be between 5% and 6%, and added, “I think more fundamental is the supply side shock. If the situation in the Gulf continues for 6-12 months, then I think that's something which has different economic risks than only sector specific.”
Impact on Construction Materials
- Cement
- Construction chemicals
- Steel
- Sand
- Bricks
- Bitumen
- Electrical wiring
- Other materials
The essential prices of these construction materials continue to rise, while there is an availability challenge for some items.
Fuel Price Hikes
Since the onset of the Iran War, the centre has hiked the fuel prices to contain the losses against the rising crude prices. Prices were increased for the first time on May 15 by Rs 3 per litre, followed by another hike of around 90 paise on May 19, and got costlier for the third time on Saturday. The fourth price hike came into effect on Monday, taking the Petrol prices above Rs 100 mark.