Housing to get costlier on 30% hike in cement prices

After witnessing a price correction in all major markets owing to sluggish demand, cement prices have increased by more than 30 per cent in a month to Rs. 275 for each 50 kg bag. With the trend expected to continue, a cement bag is likely to cost over Rs. Rs 325 this festive season, hitting the ailing realty sector and making it costlier to purchase that dream house.

Cement makers attribute the development to an increase in raw material prices.

Stocks of cement companies such as Ultratech, ACC and Ambuja Cements are up as much as 20 % since the start of this month on the back of the continuous rise in prices. A 50 kg cement bag, which used to cost Rs. 210 last month, is now being sold at Rs. 275 a bag (In Chennai Rs. 355 a bag) and there are indications that the price may go up further to over Rs. 300 by next week, said a leading cement brand's dealer.

"Cement prices are likely to rise by Rs. 30-40 a bag soon, but demand continues to be sluggish and I don't know how to push up sales," said a Mumbai-based dealer.

The price hike is affecting the realty sector and developers' apex body Confederation of Real Estate Developer's Associations of India (CREDAI) believes that a cement cartel is active.

The confederation is likely to file a complaint with competition watchdog Competition Commission of India over the continuous rise in cement prices.

"Prices have increased from Rs. 210 to Rs. 275 over the past few days, and indications are that they will go up to Rs 325 per bag in the near future" said.

In Chennai Prices have increased from Rs. 300 to Rs.355 over the past few weeks, and indications are that they will go up to Rs. 375 per bag in the near future

CREDAI Chairman Mr. Lalit Kumar Jain said that a hike of Rs. 50 per cement bag leads to an increase of Rs. 25 per square foot in construction costs & this will have to be borne by the consumer.

"We are concerned about this sudden price rise, which defies logic. CREDAI will consider moving (the competition watchdog) Competition Commission of India against the cartel of cement manufacturers," said Mr. Lalit Jain.

Analysts believe that cement prices this September month have far exceeded the levels of correction witnessed during the previous couple of months.

Due to a sluggish demand because of monsoons, and any further price hike may affect demand in the slowing economy.

Mr. Jinesh Lodaya, a senior research equity analyst at Tathastu Advisory, also said that prices are likely to go up further in the post-monsoon quarters and on the back of a festive season.

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