Casting a gloomy shadow over construction and its ancillary industries, the recently enacted Real Estate Regulation Act (RERA) has hit rebar sales significantly across India in the last one month and is expected to continue to affect markets for coming months before its impact is mitigated.
The Act which has come as a boon for consumers has faced considerable flak from builders and other traders, as it brings in stringent norms to govern the construction industry, which up until now had enjoyed fairly lenient regulations.
RERA makes it mandatory for all builders to register themselves and the projects undertaken with authorities. Failure in compliance would not only invite stern action but would also lead to funds being locked up.
Investors soon after the implementation of RERA in many states even refused to release funds fearing action and thus creating a severe liquidity crisis for builders. This almost instantaneously was carried forward to ancillary industries and it has badly hit rebar sales. Sales as well as prices & production came crashing down after 1st of July.
According to one of rebar producer from North India, “the last one month has been quite slow in terms of sales. The small and medium construction companies who make up a significant part of the entire industry have been hit severely. It would take at least five to six months before builders can fall in line with statuary obligations under the Act and start placing more orders.”
The producer added that “What is to be noted here is that the demand for quality steel would increase rapidly hence forth as the new act has increased liability on builders for structural defects. At least in metro cities like Mumbai etc demand for 500D grade of TMT would increase exponentially due to the need for vertical infrastructure development, however in tier-2 cities sales of low grade steel would continue and grades even as low as 415 would be sold to some extent”.
Leave a Reply