Real Estate

Cement manufacturers lash out at builders for ‘diversionary tactics’

Our Bureau Chennai | Updated on January 12, 2021

N Srinivasan, Vice Chairman & Managing Director, India Cements.

This is probably the first-ever strong reaction from cement body to the accusation of cartelisation by real estate firms

Cement manufacturers in the south have urged Prime Minister Narendra Modi to take steps to break the real estate builders lobby that indulges in diversionary tactics to protect the exorbitant margins they were making in sale of house prices without clean records.

This is probably the first-ever strong reaction from cement manufacturers to the accusation of cartelisation by real estate firms and recently by Union Minister of Road Transport Nitin Gadkari .

The newly created cement body - South India Cement Manufacturers Association (SICMA), which will be headed by N Srinivasan, Vice Chairman & Managing Director of India Cements, has requested the Prime Minister to initiate steps to ask each builder to come clean and their costing and ask them to reduce the house prices by 50 per cent in this depressed market conditions.

SICMA members said builders and their associations were misleading buyers and the government with diversionary tactics to prevent any questioning on their huge margins.

“Action should be taken if the entire payment is not through cheque. CREDAI and BAI have a lot of explanation to do on behalf of their members and the cartel they run at the cost of poor house buyer,” SICMA said in their representation to PM.

The office bearers, including Ravinder Reddy, director, Bharthi Cements and vice president of SICMA and Krishna Srivastava, director, Penna Cements and Secretary of SICMA, alleged that there was cartel working among builders under the banner of CREDAI and BAI, who are holding on to prices despite having a margin of more than 100 per cent.

Srinivasan explained that cost of cement in total construction costs is a very small per centage and even if the cement prices increased by another ₹100 from the current prices, it won’t be significant.

Given an FSI of 2/2.4, the cost of land in a flat would be around ₹4,200 a sq.ft. With construction cost of ₹ 2000-2500, the total flat price would work out to a maximum of .₹ 6700 per sq ft. However, the selling price of an house ranges from ₹15,000-₹20,000 a sq.ft, said SICMA.

With half a bag of cement is required to construct one sq ft, cement accounts for just 1.5-2 per cent of selling price of house. Also, retail price of cement will be much lower than the invoice price due to huge choice available in the market. All builders get cement at discounted prices only, said Srinivasan.

"Despite huge unsold inventory in the market, builders' lobby is not allowing the prices to fall," said Srinivasan, adding that builders get discounts, but they show inflated bills to claim false input credit and to avoid income tax.

He said cement sector has been one of the success stories of market decontrol and post-decontrol, cement production capacity zoomed and never was there a case of short supply.

Also, cement is being supplied at much lower cost to the infrastructure and affordable home projects of Central and state governments.

Published on January 12, 2021

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