Hormuz block could push up material costs, delay supply, hurt construction projects: Report

Mumbai: The building industry is likely to be hit due to the Strait of Hormuz blockade with exploding material costs, supply delays — and potentially delayed and even stalled projects, according to a new report released on Thursday.Forced reroutes of ships carrying construction materials around the Cape of Good Hope have added between 10-20 days to shipping times — and as much as Rs 1.5 lakh to Rs 3.5 lakh per container to the costs. Steel prices have surged around 20% to Rs 72,000/tonne from Rs 62,000 earlier. "At a very rough estimate, this adds about Rs 50 per sq ft to the cost of building high-rises in Mumbai which currently has well over 10,000 luxury units under construction. The cost of hot rolled coil now hovers at Rs 51,000-Rs 56,000 and may hit Rs 62,000 by June if the situation does not change for the better,'' said the Anarock Group report.Diesel for construction cranes and mixers is heavily associated with the $100+ price of Brent crude. This price shock will reflect significantly on construction sites in Mumbai, Delhi-NCR, Hyderabad, and other high-rise-centric cities around the country."At a time when housing sales were already tapering, Indian developers are now confronted with an even starker landscape and must find new ways to weather the storm. Diplomatic manoeuvring has succeeded in getting at least some LPG tanker ships through the Strait. However, bulk imports must now travel an additional 6,000-10,000 nautical miles, with marine fuel now at about Rs 1 lakh/tonne. Also, there are additional ‘war surcharges' and steeply hiked shipping insurance costs," said Prashant Thakur, ED & Head - Research & Advisory, Anarock Group.Luxury housing is among the most affected segments. "Italian Statuario and Calacatta marble used in Mumbai's sea-facing penthouses and other ultra-luxury units now comes with an addition Rs 50-150 per sq ft premium due to the rerouting fees, resulting in Rs 6000 per sq. ft. total all-in cost for this marble once it is installed," said the report.Premium plotted developments will face similar cost additions on imported fittings. "The impact will be most pronounced in India's high-end housing hotspots. Mumbai Metropolitan Region (MMR), India's skyscraper king with 300+ towers, over 5,500 high-rises, is also the leader in India's ultra-luxury housing segment (homes priced above Rs 40 crore.)," said the report.In 2024, India saw 59 ultra-luxury homes priced above Rs 40 crore sell for a combined value of about Rs 4,754 crore with Mumbai alone accounting for roughly 88% of both units and value in this bracket. Micro-markets such as Worli logged over Rs 5,500 crore of Rs 40 crore plus apartment sales in just two years and now accounts for about 40% of India's ultra-luxury apartment transactions."In volume terms, this speaks for the bulk of such high-end residential units sold across the country. South Mumbai, BKC, Worli, and Lower Parel lead the city's luxury vertical boom and are where almost all such projects are heavily concentrated in Mumbai. These markets are going to experience the strongest blow of the Hormuz-induced construction price shocks. It will probably not impact ultra-luxury sales, though," it said. "Luxury housing sales do not really operate in that realm. While most developers of luxury projects expect to have to hike their prices by over 5%, their target clientele can largely absorb the hikes without much strain," it added.