The government is working overtime to fulfil its promise of providing affordable, low-cost homes to low-income-groups (LIG) still seems to be a distant reality. Though the government and developers are working hard towards lowering housing costs, cost of the most important ingredient — material costs of construction — is just not coming down. Although the government, in an effort to rein in the prices of construction material, announced a service and excise tax cut on cement prices, they continue to remain high.

Land prices contribute towards the cost of any project in Mumbai but the construction cost is quite substantial too. The cost of RCC is a major component, 2/3 of the total cost of construction. Any rise in cement or steel prices directly impacts the end pricing. Some 15 years ago, the price of cement was around Rs 60 a bag, now it is Rs 270. This increase has been totally unjustified - and this is just one component. Steel prices have come down in the last few months, but those too were fluctuating on the higher side. These are those components that one simply cannot reduce or compromise with in any way during construction.

The ongoing price hikes of cement have hit the construction industry hard. It is no secret that cartelisation in the cement sector is keeping prices unnaturally high, they would prefer to reduce production rather than reduce prices. Other materials like bricks, steel, mortar, and machinery also play a major role. Transportation of the material too contributes 25-30% to the cost of the project, which must come down. One option to have control over prices is buy in bulk to take advantage of the material prices - but even in this case the quality parameters remain the same. It is too expensive to import cement from other countries due to depreciation of the rupee. It is strange when all other raw material prices have come down; cement prices have gone up. Thanks to this, the increase in cost of construction is up to 10%.

In order to help reduce prices effectively and encourage fair pricing the government needs to appoint a more powerful regulatory body to check the demand and supply of raw materials, completely ban export of cement, remove the countervailing tax completely to make import easy so that domestic prices remain under control and bring in more transparency in working of these systems.

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