How to handle Price Escalation

[Vimal]

Hi,

I started my home construction almost a year ago with a item-wise contract. The prices for several items (cement, steel, sand, etc.) have gone up during this period. The contract clearly says no price escalation will be considered for one year. I like to know what is the on-going trend in the market to handle settlement with the contractor on price escalation. Will you consider paying up a percentage of price escalation (as a good will) or none at all ?

Thanks.

[msn1270]

It depends on how your contract is executed. usually its not based on the time frame say 6 months or 1 year as the prices are very volatile in the recent years. usually contractor will put a reference price limits for the materials say for Cement, Steel, Bricks...etc based on the prices at that time. He also mentions if there is an escaltion of material prices upto 3% or sometimes 5%, he will absorb it and will not pass it on to you. only if the prices goes above those percentage, he will charge you the differential amount.

[Vimal]

Base price for all essential materials are noted in the contract. The contract says no escalation allowed for 12 months. Only after 12 months, if the price is above 3% then escalation will be considered for the difference in amount. Does it sound reasonable & a common practice ?