HYDERABAD: The Confederation of Real Estate Developers' Associations of India (Credai) is looking at bulk buying to procure most of the building materials directly from manufacturers in a move aimed at cutting costs for its members numbering more than 11,000 across the country.
"We are preparing to experiment with the bulk buying model shortly to bargain efficiently with the manufacturers to improve margins in the subdued residential realty market," said C Shekar Reddy, former president of Credai, the apex body of private builders in India.
The builders consume thousands of tonnes of cement, steel, ready mix, cables, electrical fittings, elevators and paints, among other materials, every year. Credai's move comes at a time when property developers are saddled with over $100 billion (about Rs 6.2 lakh crore) worth of unsold residential stock piled up over the last few years. A Knight Frank report said the sale of residential units fell to 2.34 lakh units in 2014, a drop of 17 per cent compared to the previous year, while new launches saw a steep fall of 28 per cent at 2.68 lakh units during the year.
Reddy said Credai had experimented successfully with the bulk buying model on a pilot basis earlier by procuring large quantities of cement from the Cement Corporation of India. "We could not continue with the bulk buying model as the industry body did not have numbers those days. Today we are fairly a large community and can consider displaying our bargaining power with the manufacturers to gain significantly over traditional buying models," he said.
Credai has identified several large domestic and global manufacturers of various building materials and has initiated talks with them, seeking significant cost benefits through purchase of large volumes for longer tenures, Reddy said. "We may even come out with global tenders, if needed, to evoke competition among the manufacturers of building materials to elicit competitive prices. We will consider importing from the global markets wherever it works out cheaper," he said.