How will coal shortage impact construction cost in India?

India is the fourth-largest coal producer in the world, and about 52% of India’s electricity is generated from coal.

Even so, India still has to import coal for its use due to high demand. Also, the rise in demand for electricity saw a surge of 20% during the post-pandemic period. Eventually, Covid-19 has brought an increase in demand for various things, thus impacting the global economy. 

Coal Shortage Crisis 

The government issued four main reasons for Coal depletion –

• Imported coal prices have risen at an unprecedented rate. 
• Coal mines were impacted due to heavy rains in September and affected domestic coal production.
• A rise in electricity demand was due to the recovery of the economy following the pandemic. 
• The financial crisis and the non-building of adequate coal stocks.  

Importance of Coal in construction

Coal is the key energy source for production in the cement and concrete industry. It provides you with a raw material base for the manufacture of building materials. Both cement and concrete are important construction materials used in housing, bridges, roads, etc. Hence, the coal shortage will unprecedented impact the construction cost in India. 

Coal Shortage: Impact on Construction Cost

The pandemic crisis caused raw material costs to rise, such as cement, bricks, and concrete. Now with the hike in prices of fuel and coal, construction costs have suddenly gone up by 20% in India. According to industry sources, “A grade cement is currently Rs 525/sack, over Rs 35-40 higher than its selling price.”

Ordinary grade cement has gone from Rs 410 – Rs 460 per sack. 

Other construction materials such as electric cables, steels, PVC Pipes, M- Sand, and P-sand also saw a surge in prices. 

Manufacturing Sand (M-Sand) and Plastering Sand (P-sand) were Rs 14,000 and Rs16,000. Now it has gone up by Rs 2000/Load. 

PVC pipes and electric cables prices increased by 15-20% depending on the brand. 

The high prices have also impacted the overall cost of flats. The construction cost is said to have gone up by Rs 300- 400 per square foot. Correspondingly, builders have increased the cost of residential apartments too.

Apart from this, the coal shortage has also led to a power crisis across many parts of the country. Eventually, power cuts will impact the construction process as manufacturing machines wouldn’t be working without electricity. 

Dealers/Constructors expressed that the price hike of 3-4% would have been manageable, but the rise of 15-20% is imposing challenges in the industry sector and a situation to worry about. 

Importance of Construction Cost in Real Estate

Construction Costs helps real estate developers to facilitate and do thorough planning of the projects. By estimating the cost of all the various aspects required to complete successfully, the contractor can easily plan future costs that may be incurred during the project. With accurate cost estimates, building developers know how the available funds can help them achieve their specific goals. 

Coal Crisis Impact on the real estate market

Since the Coal Crisis has unexpectedly surged the construction costs in India.    

Increasing construction costs became the foremost concern for real estate agents and developers. Continuous rise in prices of construction materials and labor shortages, and now coal shortage has significantly impacted the value of new constructions and existing buildings. 

Many complex factors affect the value of commercial real estate, but one of the most notable factors in recent years is rising construction costs. As it is expensive to build, so is the replacement cost. This will increase the value of the existing buildings in the industrial park. New buildings require more rent, and existing buildings can increase rent based on this information. 

Conclusion 

Such wobbling across the globe has affected many nations. The coal shortage will severely impact the developing nations and its economy to come back on track. Former Chief of Coal India Limited, MS. Zohra Chatterji, stated that “Electricity powers everything, so the entire manufacturing sector- cement, steel, construction – everything gets impacted once there is a coal shortage.” She describes the current scenario as a “wake-up call for India,” claiming that the time has come to reduce the country’s over-reliance on coal and adopt a more aggressive renewable energy policy.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.