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Pune, November 15 Last year saw real estate developers maintaining that rising steel prices were among the prime reasons for soaring property prices. Now, steel prices have dipped substantially, thus reducing input costs for the construction industry — the biggest consumers of steel in Pune. But no builders are shouting about it in a market already looking bleak because of the ongoing recession.

“For new infrastructure projects, construction rate should definitely be lower. Anyone using steel for construction now should save around 10 per cent in costs,” said Narendra Bhandari, president of Pune Iron and Steel Merchants Association.

From a peak of Rs 50,000 per tonne last year, prices fell to Rs 30,000 per tonne in October before steadying at Rs 35,000 per tonne. Because of this, the construction cost should be at least 10 per cent less, say industry watchers. But with no business really taking place, it is too early to say whether realtors will pass on the benefit to customers, they say. “Steel prices have come down by 40 per cent. The construction cost for an apartment is around Rs 1000 per sq feet of which the steel component used to be around Rs 150 per sq ft. As prices have fallen now, the steel component in the input cost would be Rs 60 per sq ft less,” said Bhandari. For a 1,000 sq ft house, this would work out to a reduction of Rs 60,000.

“The reduction of property prices has been more than this. Lower steel price has contributed to the fall in property prices, in addition to the other recessionary factors,” he said. This reduction has come about for ready flats, despite developers procuring steel at a higher cost in the last year; it is primarily due to lower demand.

Shashank Paranjape, MD, Paranjape Builders said property prices were steady at present and input cost had not come down substantially because of steel. But any reduction in input price is welcome in this situation, he said adding that the benefits would be passed on to the customer.

“The steel market is volatile, we will have to wait some more for a clearer picture. In January, we could rationalise prices because of steel prices,” he said. However, Paranjape said steel price had only reduced Rs 25 per sq ft for every Rs 1,200 per sq ft of input construction cost.

Steel traders say owing to recession there has been a 40-50 per cent reduction in demand. The biggest beneficiary of the slump in steel prices would be infrastructure projects, especially flyovers and bridges.

In the construction of roads, steel has limited use, but not so in flyovers and bridges. “For a bridge, the steel cost is 35 per cent. With the fall in prices, the construction cost would reduce by 10 per cent,” said S A More, Walescha Constructions, which also undertakes government’s infrastructure projects.
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