Developers and
promoters across pan India 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 sector have rebuked this claim.
Mr. A. K.
Prabhakar..!
A new study has
however said that cement contributes about
6 to 13% of the construction cost depending on the type of the project.
Mr. A. K. Prabhakar,
Senior VP, Equity Research, Anand Rathi Financial Services said, "Cement
contributes about 6% to 13% of the construction cost depending on the type of
the project. This cost is significantly lower than other components like steel
& labour, which impact the overall construction cost the most. Cement
prices in the last 4 to 5 years have risen lower than the inflation."
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| Mr. A. K. Prabhakar |
Apart from cement
there are many other factors that impact the construction cost of projects.
Commenting on price increases by manufacturers, Mr. A. K. Prabhakar said,
"These price hikes are very much passable as this commodity has no
substitute & is price inelastic. Therefore, the price hike on the overall
cost of construction of the project due to increase in cement price is
negligible."
Order of Penalties..!
In response to the
CCI (Competive Commission of India) 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 about one to two years for actual implementation of the order and if
implied then it would be a one time hit to the cement companies."
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