How Increasing Construction Material Costs Affect Property Prices

Property prices have seen a continual increase in the wake of rising construction material costs and labour dearths. These costs are having a considerable impact on the final value of new constructions and finished structures alike. Real estate developers are forced to revise their projects' costs, which is clearly not putting an end to investors' and end-users miseries.

The aimless delays and even abandonments have been seen in the project deliveries owing to rampant increasing inflation rates in the country. In today's capitalist society, high public demand and supply shortage of oil and gas is an open phenomenon behind the rising construction material prices, especially in Punjab province.

In this blog, Apex Group will explain how increasing construction material costs impact the property prices and overall real estate of Pakistan.

PM Imran Khan's Historic Construction Package

In April 2020, Prime Minister Imran Khan announced a historic 'Construction Package' and 'Amnesty Scheme' with a vision to give the construction sector status of an industry. It boosted the country's economic activity by encouraging the low-risk construction industry.

Among the favourable incentives of this scheme, the Government of Pakistan waived off the withholding tax for building materials (excluding steel and cement) and the construction services like electrification, shuttering, plumbing, allied services etc. The incumbent government had to extend the package for another year as it successfully attracted so much business.

As of September 2021, approximately 2,125 construction projects worth Rs. Four hundred ninety-three billion registered with the FBR under this scheme. The FBR-registered projects were allocated tax incentives and even no declaration of income source for the investors on the condition that these projects will be accomplished till 2023.

4 Basic Construction Materials: Comparison of Current & Last Year Prices

Here is a comparison between the current and last year prices of four basic construction materials. You might better understand why your contractor is worried if you continue reading the blog.

Bricks

Bricks are the essential building blocks of any buildings. The cost of bricks depends on their quality and size. Generally, there are three types of bricks available in the market. Usually, the standard size of a brick in Pakistan is 9 x 4 x 3 inches (Length x Width x Height).

• A Grade- Awal Eent
• B Grade- Doem Eent
• C Grade- Khanger Eent

Since 2020, a 40 to 50 per cent price increase in bricks has been experienced. Last year, Awal category 1000 bricks had a cost ranging between 10,000 to 12,000. But today, a unit of 1000 A-category bricks amounts to 14 to 18 thousand rupees. It's evident with the price mentioned above that how increasing construction material costs have affected the property prices.

Cement

Like bricks, cement is another essential construction material used in our country. Its prices are also constantly soaring and directing to an overall increase in the financial value of a project.

In October 2021, we experienced a PKR 25 price increase per bag of cement. This hike is being associated with the jump in international coal prices. The cement bag price has reached PKR 650-680 today from PKR 500 of the last year, which is more than a 35% price hike.

Sand

The two types of sand, Ravi and Chenab, are primarily used in construction. The former, in Pakistan, is preferred over the latter.

Prices for Ravi Sand in Punjab are now double compared to last year, from PKR 7,500 per truck to PKR 15,000. The second most-used sand, Chenab sand, is also known as plaster; the price increased by PKR 10 per sq ft.

Steel

The prices of steel have also been increasing in the country, and since it is one of the most important construction materials, its price hike has doubled the woes of general folk. While comparing with last year price of steel, a 70 per cent hike has been undergone. Presently per kg Grade-60 prices of steel bar has risen from PKR 110 to PKR 190.

In the leading newspaper of Pakistan, Dawn, it was reported that since November 15, 2021, 'Amreli', the eminent steel bars manufacturer, has increased its steel bar prices by Rs. 3,000 to Rs. 193,000-PKR 195,000 per tonne. The real estate developers are also showing their concerns about the fluctuations of prices, restricting them from limiting their ability to deliver projects on time.

Meanwhile, the government's first and foremost priority is to fill the gap of the housing shortage in the country, which seems nowhere close to a realization that can be seen now with the successful functioning of Prime Minister Imran Khan's historic construction package.

For more information and smart investments options, contact Apex Group.