Tuesday, 24 February 2015

Gritty problems plague sand

Demand is growing but supply and storage issues keep prices volatile
Sand, a key construction material, has been a source of angst for developers. Availability woes have led to volatile prices. “There is a lot of uncertainty in procuring this crucial raw material,” says C Shekar Reddy, President, CREDAI National, an association of real estate developers.
Chitty Babu, Chairman and CEO of Akshaya, a Chennai-based property developer, notes that sand prices in Chennai were in the range of ₹600 per cubic meter (cu. m.) in 2012, but zoomed to a peak of ₹2,600 per cu. m. in 2013-14 due to local bans. This has eased now and sand is available from a couple of quarries.
Supply gaps
Demand for sand has been growing from the residential segment as well as for developing infrastructure, such as airports, ports and metro rail. Chitty Babu says that demand has shot up 10-fold over the last decade.
And although supply is available, the extraction process has not been efficient. Sand occurs naturally in river beds and can be extracted directly. Local, State, and in some cases, Central government permissions are required for mining sand. But similar to illegal mining issues seen with iron ore, there have been problems in this segment too — contractors extract more sand than what they are allowed to remove and operate beyond their stipulated hours.
The rights to mine sand are often controlled by cartels and vested interest groups. Courts have come down heavily on such quarrying and shut their operations. This has aggravated scarcity in certain regions.
Even in places where operations have been streamlined, the output has not been enough to meet demand and prices have drifted upwards. One example Reddy points to is Visakhapatnam. Here, quarrying operations have been handed over to women’s self-help groups. Prices in the State have increased substantially. For instance, sand is up from ₹750 per cu. m. to double that in Visakhapatnam and over ₹1,000 per cu. m. in Nellore and Vijayawada.
Local issues
Another aspect that adds to sand’s availability woes is that unlike other building materials, there is no inventory maintained. Even in factories where concrete mix is produced, sand storage in silos is sufficient for only a few days. Due to lack of inventory, transportation and logistics are important issues and lorry strikes add to the woes, says Arvind Gowda, CEO of Expat Engineering, a developer with presence in multiple cities.
Bulk of the demand comes from metros and sand needs to be transported over long distances. For example, sand for the Bangalore region is brought from locations including Tumkur, Mangalore and Tiruchi in Tamil Nadu. In regions where sand is not available close by, sand costs jump up when fuel costs rise. That said, the recent drop in diesel prices has not lowered sand costs, say builders.
Wherever possible, sand is purchased from the closest sources. As local supply decides prices, there are wide variations between regions.
For instance, sand price in Noida is over ₹2,000 per cu. m. while in Chennai it is closer to ₹1,500 per cu. m. Also, costs are higher during the monsoon season compared with summer months, because mining is easier in the dry season.
Alternative sources
To meet demand, developers are increasingly using mechanised sand, popularly known as m-sand. This is manufactured from quarries by grinding rock. It is not just more readily available but also has cost advantages. For instance, in Hyderabad, where natural sand costs around ₹950 per cu. m., m-sand costs ₹550 per cu. m. However, m-sand is not for plastering and is suitable only for concrete mixing. Most ready-mix concrete plants already use this alternative. Over half the developers are opting for pre-mixed concrete in their construction.
Another source of natural sand is the sea. But it is not used in the construction of concrete structures because it contains salt which absorbs moisture, says Gowda. Hence, it is used primarily for plastering. One other way to obtain more natural sand is by de-silting reservoirs in urban areas. Data shows that nearly 75 lakes in Bangalore have disappeared in the last 25 years due to lack of maintenance. Removing silt from water bodies using dredging equipment can help protect them and also be a source of sand — a win-win for all, says Reddy.
Price trend
One square foot of built-up area requires 1.2 cubic feet of sand. In Chennai, sand cost would be ₹50 per sq ft sold. Typical construction costs are around ₹1,200 per sq ft. Total sand costs, river sand and m-sand form 5 per cent of building civil shell and core cost in the Mumbai area, says Harleen Oberoi, Executive Director, Project Management, Cushman & Wakefield, a real estate consulting firm. He notes that river sand prices have fallen by around 20 per cent while m-sand prices have increased by around 10 per cent in the last three years.
In most regions, the expectation is that sand prices may remain range-bound. While supply issues could persist, the use of m-sand, slow launches in the residential segment and respite in diesel costs may keep prices from rising steeply.
SOURCE: Hindu Business Line