Inflation impacts adverse construction industry in Kerala

By Sanila Arjun

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Kochi: The construction industry is facing a huge crisis as the cost of raw materials have increased rapidly. Everything, including cement, steel, iron and PVC, has become costly. The price hike started during the Covid is still pertaining along with the impact of the Russia-Ukraine war.

Headline inflation in the sector is around 20-25 per cent annually, but one month after the beginning of the war, the wholesale prices shot up by 10 per cent. The retail price is up to 15 per cent higher.

The construction cost increased by Rs 250-300 per square ft in the last three months. Since Covid, the construction cost has gone up to Rs 750-1,000 per square ft.

Except for Kerala, most other states have cut the registration rates to reduce the burden. Rs 100 per square meter is charged for commercial buildings in the state to register with the RERA (Real Estate Regulatory Authority). In Kerala, registration accounts for 10% of the total project cost. In other words, for an apartment worth Rs 55 lakh, one has to pay Rs 5.5 lakh for a change of ownership alone.

The GST rate on construction materials is an addition to this. When gold is taxed at 3%, cement is taxed at 28% and steel and wire at 18%.

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