The Hindu Business Line : Construction boom in Kochi hits rooftop

Kochi, July 2 The construction boom in Kochi continues unabated despite sharp increase in the price of materials and taxes because of growing demand for flats in the city and its suburbs.

The increase in materials cost and the consequent rise in the price of flats do not seem to have deterred rich buyers because they feel it is still cheaper than that in other metros such as Bangalore, Mumbai and Chennai.

“Sales are taking place as high-income group professionals in the IT and other sectors are interested in investing in flats osensibly to reduce the income-tax burden as well as to reap the benefit of property appreciation,” Mr B. Rajagopal, Managing Director, Platinum Superstructures (P) Ltd, told Business Line. According to him, many non-Keralite professionals are also investing in flats here as they expect the rates to go up further in the coming years. The demand is huge in the Rs 10-15-lakh category but it is impossible for a quality builder to provide flats at this range because of high construction cost. According to builders, cement price has gone up to Rs 260 a bag from Rs 180 a bag one year ago. Similarly, the price of river sand has increased to Rs 40-45 per cubic ft from Rs 28 per cubic ft in last May. Price of 20mm granite chips is available now at Rs 29 per cubic ft against Rs 16 per cubic ft. Steel prices have increased to Rs 32 a kg from Rs 27 a kg while burnt bricks now cost Rs 3.50 a piece against Rs 2.20 in last May.

Added to this, wages of masons, carpenters and unskilled workers have gone up by 50 per cent in three years. Daily wage of masons and carpenters today are around Rs 300 while that of a helper is around Rs 200, they pointed out. Then comes the government regulations and new taxes on the industry. All these put together make it unaffordable for the middle and low-income groups, Mr Rajagopal said. Reduction of floor area ratio in Kochi and new rules for registration for flats has resulted in higher prices. Taxes and registration costs put together work out to an addition of 20 per cent of the cost, he said.

Tax rates at present are service tax 4.04 per cent, sales tax 2 per cent and one time village tax 1 per cent.

(approximately), construction workers welfare fund 1 per cent and 12 per cent registration charges of flat at 12 per cent of total cost of the flat.

According to Mr Rajagopal, formerly a senior official of a nationalized bank, rising interest rates on home loans is also an impediment of late. Banks like SBI, which used to give home loans at around 7.5 per cent an year ago, is now charging 12.5 per cent. All banks have increased home loan rates resulting in a glut in the segment. ICICI Bank has already reported a fall of over 20 per cent in its home loan disbursements compared to the same period last year. However, the increase in costs has mainly affected the MIG and LIG category, he said.

Therefore, most of the builders felt that the government should understand the plight of the people in these two segments of the society and step in to provide surplus/excess land available with it at concession rates or and provide tax sops for the low and middle-income this category of residential apartments.

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