Property

Increase in Construction Cost in Pakistan Over the Last 3 Years

Construction Cost in Pakistan

The construction cost in Pakistan has risen dramatically in recent years, whether it is for commercial or residential projects. However, there is a positive aspect; there has been a huge improvement in the quality of such items and there are a lot more opportunities available to choose from nowadays. You can get imported tiles and furnishings, or imitations of all the things you need and want to make your house a dream home, made locally. 

In addition, building trends have also evolved dramatically over the years, and you will be able to quickly find furnishings and decorations entirely devoted to homes and/or offices. Here AboutPakistan Property portal will discuss the changing dynamics of the construction materials in Pakistan and our focus will mainly target past three years of development (2018-2020). Furthermore, we will also highlight some latest aspects related to the real estate industry, so that the investors and buyers can get benefit out of it. 

Patterns Allied with Higher Cost of Construction In 2021 

There are various factors that depends on construction cost, mainly categorized as: 

  • Location of property 
  • Covered area 
  • Design and layout  
  • Material quality  

Under-construction houses may be graded according to the materials used, but other expenses, such as labor, remain the same. An A+ category project of any size or scale would cost more than the same size and scale of an A category project. The constructions costs of an A+ category 5-Marla or construction cost of an A+ category 10-Marla can be viewed on our property blogs for a better understanding. 

Read more: Finishing Cost of 10 Marla House in Pakistan in 2021

Meanwhile, the labour cost remain same as it is fixed cost. However, in recent years (2018-2020) the material cost which is a variable cost have augmented as: 

Construction Material Change in Price (Dec 18 – Dec 20) 
Pipe fittings 32% 
Steel bars and sheets 23% 
Construction input items 23% 
Bricks, blocks and tiles 22% 
Cement 19% 
Paints and varnishes 15% 
Ceramics and Sanitary Fixtures 9% 
Glass Sheets 7% 

The above figures fetched from Pakistan Bureau of Statistics Monthly Price Indices. 

Through the bureau data it shows how the key materials which used in construction have significantly raised during the last three years (2018-2020). 

While the cement industry is booming, prices are anticipated to stay under control, as a range of construction sector programs have been launched by the government. 

Cement sales rose to 15.1 million tonnes during the second quarter of fiscal year 2020-2021, according to figures published by a leading newspaper. This is an 11 percent rise on a quarter-on-quarter and year-on-year basis. 

Meanwhile, since coal is used in cement production, its price has also risen, reaching approximately USD 90 per ton of free-on-board (FOB) compared to USD 60 per ton of FOB at the end of October 2020. 

The Pakistan Association of Large Steel Producers has announced that steel prices are going up worldwide and a similar pattern can also be expected in Pakistan. Imports of iron and steel scrap (raw materials for the manufacture of steel bars) stand at 2.68 million tonnes, costing USD 949 million in July-December FY’21, compared to USD 2.062 million tonnes, hovering at USD 806 million, during the same period last FY, as announced by the Pakistan Bureau of Statistics. 

Data collected by the Dawood Hercules Corporation research team, a holding company with investments in Engro Corporation, indicates that steel and cement rates may rise further in the international market.

Meanwhile, research analysts at JS Global, a Pakistani broking and investment banking company, have speculated that this pent-up requirement will inevitably be fulfilled and prompt prices to drop in the coming months due to Covid-19-triggered supply chain disruptions. 

As quoted by a leading Pakistan newspaper, Hassan Bakhshi, the former chairman of the Association of Builders and Developers, revealed that the cost of construction on a high-rise project has increased by 6 percent to 9 percent as steel bars carry a 40 percent to 45 percent share of the overall construction costs of such developments. 

As the share of steel bars varies between 15 percent and 20 percent of total expenditure, the cost of construction in Pakistan for housing projects has also increased by 4 percent to 6 percent. 

As overall prices are rising, so are labor costs. In such times, projects for construction can be severely delayed and not executed in the specified period agreed earlier by the developer. As developers are unable to handle the rising costs themselves, the final cost of the project could also rise. This does not mean, however, that the economy is facing deflation. In the construction industry, tax exemptions produce rapid activity and create opportunities in related industries as well. 

Pakistan’s Construction Trends 2021 

The government is working round the clock to improve Pakistan’s construction industry. Due to the Covid-19 pandemic, the year 2020 has been tough for most economies to survive. All things came to a halt overnight. However, when it came to lifting lockdowns, Pakistan followed a sector-wise strategy, and the first sector to resume operations was the construction sector. And it is not surprised that industry is booming due to the introduction of the amnesty scheme in construction industry and opening the only industry after lifting stepwise lockdown  

In the past year, a variety of opportunities for the construction sector have been implemented. Despite the pandemic shutting down the world in 2020, the current government’s plenty of construction-related incentives not only helped the sector survive, but also flourish. In related sectors, its influence has also been felt. 

The government would not raise any sales and fixed taxes from construction activities carried out under the Naya Pakistan Housing Scheme, as per the announcement of Prime Minister Imran Khan (NPHP).

A special committee was also formed by PM Khan to resolve the problem of rising steel prices. He also holds frequent meetings with important members to make sure that nothing stands in the way of revitalising the economic growth of the country, particularly in the construction sector. 

The rising cost of construction in Pakistan does not need to concern investors and developers. It would be sensible for most genuine buyers to wait a bit if you are building your house on a budget. 

For investors and buyers, a perfect time to grab the opportunity as now is the time to utilize government tax exemptions schemes. 

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