West Asia Conflict Pushing Up Construction and Labour Costs, Putting Pressure on Real Estate Sector, Says Vikas Oberoi
Mumbai, May 18: Vikas Oberoi said rising construction and energy costs, expensive labour and material availability challenges from the West Asia conflict are stressing the real estate sector. However, contingencies built into projects are protecting margins at present.
Cost Pressures Across the Industry
"Energy cost has gone up, aluminium has gone up, glass has gone up, labour has become expensive. Availability of materials becomes a bit of a challenge. So, these are stressing us out. But it's a problem for the entire industry and we all are grappling with it. Slowly starting to hurt you in a way," Oberoi said during the company's Q4 FY26 earnings call. The company expects construction costs to rise and is factoring the increase into ongoing projects.
2-3% Cost Increase Expected
According to Oberoi, the company is currently estimating an overall cost increase of around 2 per cent to 3 per cent. However, he said the rise remains within the contingencies already built into projects and is therefore unlikely to impact the bottom line at present. "We actually made sure that we know for a fact that there will be a cost increase and we are factoring that within the projects that we are doing."
Contingencies Being Eroded
Oberoi acknowledged that the buffers built into projects are now getting "consumed or eroded, as we speak." He said the company had repriced several aspects of its projects, factoring in the expectation of higher future costs. "Yes, costs are going up. We literally make sure we have a lot of contingency built in when we do our budgeting. But it's within the contingencies built. So really, it won't affect the bottom line right now."
Launch Pipeline and New Markets
Oberoi Realty is planning to launch Three Sixty North in Gurugram, a small development on Carter Road, Oceanic, another project at Malabar Hill (Fairview), and Tower D of Forestville (Thane) in the first quarter itself. The company is also evaluating a sale model for its 11-acre RLDA project in Bandra East rather than a lease model. The Gurugram project will feature apartments larger than 5,000 sq ft and 8,000 sq ft, similar to Three Sixty West in Mumbai.