DELHI: If that apartment you have been eyeing has become dearer, or if the developer has warned that your flat nearing completion will take a few months more for handover, recall the zeal of an unsuspecting young IAS officer and the media fracas that followed.
Developers, suppliers and sand miners ET spoke to say the National Green Tribunal order last week has drastically hit sand excavation, jacking up prices of the crucial construction material.
Property Prices may Go Up 10%
Following the controversial suspension of Durga Shakti Nagpal, who took on illegal sand mining in UP riverbeds near Delhi, the tribunal a special fast-track court set up under an Act of Parliament for fast resolution of cases related to environment — had slapped a stay on all sand mining activity in riverbeds that do not have the required environmental clearance.
With that, even miners who have a licence from state governments have had to halt operations and apply for environmental clearance from the Union ministry of environment and forests or the State Environment Impact Assessment Authority, which is expected to take a minimum of 30-60 days.
This, feel industry players, will increase property prices up to 10%. The acute shortage of the material that makes for about 10-15 % of the construction cost in any housing project could also delay an array of projects under construction.
"Projects are already slowing down because of shortage of sand, and whatever is available has become more expensive," says Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers Association of India and managing director of Pune based developer Kumar Urban Development. Sand prices, say developers and contractors, have already moved up 20-30%, varying from city to city.
In the National Capital Region (NCR), prices have gone up from Rs 37 per cubic foot to Rs 45 per cubic foot. In Mumbai, it has gone up from Rs 80 per cubic foot to Rs 100 per cubic foot.
"None of our sand suppliers is willing to give us any assurance on the supply. Now the price is changing on every delivery," says SK Sachdeva, executive director of Ahluwalia Contracts, which does third party contracting for several leading developers. Projects the company is working on for developers like Jaypee Group, Logix, Assotech, Tata Housing and others in NCR have slowed down, he says.
The cost of delay and the higher cost of sand, says Anshuman Magazine, managing director of property advisory firm CBRE, will force developers to pass on the burden to end consumers. Yet, in the current market when sales are already slow in several locations, many of them might not be able to increase prices, taking a hit on their margins, he adds.
While developers in Mumbai and NCR will find it difficult to raise prices considering a drop in sales over the last few quarters because of high prices, the Bangalore realty market has seen stronger demand, which could help developers raise prices marginally. A sand miner based in Noida says right now there is a shortage of sand in the market because none is available in the market, legal or illegal.
"We have doubled our distributor pricing in the last one week," says the miner, who did not wish to be identified. But after the NGT order, he has applied for environment clearance that, he says, will take at least 30 days. While sand prices have certainly gone up in the last week, prices have been on the rise over the last one year since the Supreme Court, in February 2012, passed an order that even mining of minor minerals, including sand, on areas less than 5 hectares will be subject to environmental clearance. Be it legal or illegal mining, the sand mining mafia has a strong hold over supply of sand and pricing.
"We cannot go directly to a miner for a better rate and assured supply as it is controlled by a few people. The supply is regulated by them so prices will never drop, but only go up," says a senior executive of a Bangalorebased developer, who did not wish to be named. "The government should ensure there is an alternative for supply of sand, otherwise it will impact construction and property prices," says Rajeev Talwar, group executive director at DLF.
The sand strike in Bangalore a few years ago had brought all real estate projects to a standstill, and this time a blanket ban on mining is threatening to have the same effect across the country. Some developers have already started looking for alternatives to sand in the construction process. Lodha, for instance, has reduced utilisation of sand over the last one year by using fly ash, some chemical additives and other methods.
"But these alternatives are more expensive than sand. Increase in input costs is likely to raise property prices in the long run," says Abhisheck Lodha, managing director of Mumbaibased Lodha Group. The blanket ban, says Getamber Anand, managing director of ATS Infrastructure, will only result in an increase in sand smuggling by the mafia, rather than curb it.