They Blame The Cement Cartel of Pushing up Construction Costs

Developers across the country get into outburst mode when cement manufacturers increase prices. They blame the cement cartel of pushing up construction costs. While manufacturers have insisted that cement price hike has only a marginal increase in construction costs, real estate industry have rebuked this claim. A new study has however said that cement contributes around 6-13% of the construction cost depending on the type of the project. A K Prabhakar, senior VP, Equity Research at AnandRathi Financial Services said in a note: "Cement contributes around 6-13% of the construction cost depending on the type of the project. This cost is significantly lower than other components like steel and labour, which impact the overall construction cost the most. Cement prices in the last 4-5 years have risen lower than the inflation. " Apart from cement there are many other factors that impact the construction cost of projects. Commenting on price increases by manufacturers, the note said, "these price hikes are very much passable as this commodity has no substitute and is price inelastic. Therefore, the price hike on the overall cost of construction of the project due to increase in cement price is negligible. " In response to the CCI order of penalties on the cement companies for cartelising, the analyst said that the companies have now appealed to COMPACT and "we believe, this will take time to actually get executed as other such cases are still pending since a couple of years. But we feel the overhang of this issue is gone and it will take around 1-2 years for actual implementation of the order and if implied then it would be a one time hit to the companies. " Source: uaecement