The real estate
developer is not solely to blame on the price movement in India, says a Knight
Frank new report.
About 57% of the total construction cost in a
project comes from 3 major input items like Steel, Cement & Labour. The cost of steel
and cement has gone up by 35 per cent and 24 per cent respectively in the past
three years.
In its latest Economy
and Realty report, Knight Frank India (Research) takes a look at the disconnect
between the demand & price of real estate over the last few years that gave
rise to questions on the position of real estate developer.
Highlights of Knight
Frank India Report..!
^ While there has
been a lot of debate about the standoff between house buyer & developer,
little has been discussed about the relationship of the developer with
suppliers of factors such as plot of land & construction costs.
^ Plot of land &
construction cost happen to be the 2 largest cost components involved in a real
estate project. The methodology of fixing plot of land prices & rise in cement and steel cost leaves
developers with low bargaining power while the home buyers bear the ultimate
brunt.
^ The real estate
developer is a price taker in most of the items used in construction & has no significant influence on their price
movement.
^ The sector
structure clearly highlights that isolating the developers and holding them
responsible for inflated property price was not justified, it observes.
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