Construction costs rise 33% in Bengaluru as Tamil Nadu supply ban squeezes builders

Realty construction costs in Bengaluru have risen about 33% after Tamil Nadu extended its ban on transporting construction materials until January 2027. Sand prices have nearly doubled, cement and steel are up 8-10%, and builders warn of project delays of at least six months.

BENGALURU: Realty-related construction costs have risen about 33% while sales have slowed, squeezing builders in Karnataka. The cause is Tamil Nadu’s ban on transporting construction materials such as M-sand, P-sand, aggregates and ready-mix concrete, extended until January 2027, which has cut stone, sand and jelly supply to about 40% of normal levels. A crushers’ shutdown has added to the strain.

Builders said there has been a shortage of sand and jelly, while cement and steel prices are 8-10% higher. Sand prices have risen from Rs 250-300 per tonne to Rs 450-800 per tonne, nearly doubling costs. Over 70% of Karnataka’s stone crushers and another 15-20% near the Tamil Nadu border around Krishnagiri are affected by supply disruptions.

Farook Mahmood, president emeritus of the Bangalore Realtors Association India (BRAI), said: “The four-month Rera extension offers some relief, but projects could face delays of at least six months, as the Tamil Nadu ban extends until Jan 2027. Construction costs could rise by Rs 250-400 per square foot. Builders are sourcing materials from neighbouring states or available market stocks at higher prices.” He added that homebuyers may have to pay both pre-EMIs and rent while waiting for possession.

Suresh Hari, partner at Vishal Promoters & Builders, said: “Under Rera, we cannot revise prices once committed. When material costs rise, builders must absorb losses or delay sales, with buyers ultimately bearing indirect price hikes.” He noted that storing materials in advance raises holding costs, and called for a regulatory mechanism to address the issue.

Ramani Sastri, director of Sterling Developers, said: “The gap in all construction products is widening and the projects are slowing down considerably. The cost of construction has gone up by about 15 to 18% and is likely to go up further. Rera extension can only help soften penalties of delays and nothing else.”

Bhaskar T Nagendrappa, president of Credai Karnataka, said costs rose initially during the western Asia conflict and the recent ban has fuelled further increases. Credai said it has a meeting with government officials scheduled next week. Builders are also looking at alternatives in paints, tiles and sanitaryware, all linked to petrochemicals, while more than 200 building material units in Morbi, Gujarat, have reportedly shut, adding to supply concerns.

Builders are seeking government intervention, with key demands including resolving the double royalty issue, allowing compliant crushers to operate for extended hours, coordinating with the Tamil Nadu government to permit royalty-paid materials with e-permits in border districts, deferring premium and approval fees for three months, expediting approvals and publishing a revised summary schedule of rates.