Growing Construction Cost makes Low-cost Housing Unviable

by M. Wasim

Low-cost housing cannot be materialized when inflation is rampant and pricing of construction materials have gone out of control. That’s’ one of the biggest dilemma of the federal government because for the last over one year Prime Minister Imran Khan has been holding weekly meetings of National Coordination Committee on Housing, Construction and Development in Islamabad with all the stakeholders, but seems incapable to bring down the prices of major building materials like cement, steel and others.

Vision of 5 Million Houses

Before taking reigns of the federal government in 2018 Prime Minister Imran Khan had pledged to build 5 million houses for low-income group of people and called it his government’ flagship program. The manifesto of Pakistan Tehreek e Insaaf (PTI) also states the same;

“PTI will play the role of an enabler and facilitator, but not developer, to build 5 million low cost housing units . . . . We will ensure the development of 1.5 to 2 million urban and 3 to 3.5 million rural housing units.”

But after the completion of three years in government, constructing 5 million houses in 5 year appears as an undelivered promise.  Last month Minister of State for Information and Broadcasting Farrukh Habib told that 20,000 housing units under Naya Pakistan Housing Scheme have been completed to date whereas 45,000 houses are under construction. In the Senate Babar Awan Adviser to PM also disclosed this month that the private sectors have submitted 180 proposals to Naya Pakistan Housing and Development Authority for construction and out of them some 45 projects comprising 75,000 housing units have been shortlisted.

Although, Babar Awan assured the House that work on these projects would start very soon, but the fact is due to the continuous surging prices of construction materials private builders and real estate developers are in a situation of uncertainty to start construction. As within a span of nine months the cost of major construction materials have been enormously scaled up. Manufacturers point out at devaluation of rupees, rising cost of raw material globally and imposition of duties on building products as the reasons, but constructors widely blame the unchecked cartelization behind the rise in prices of construction materials.

Have a look at the prices of basic construction ingredients required to construct only a grey structure of a house;

  1. Cement; The cost of 50 kg bag was Rs 430 in the Northern region and about Rs. 450 in Southern region just nine month ago. But in the financial year 2021-22 the prices of same product is Rs. 675 and Rs. 650 in Southern and Northern region respectively.
  • Steel; Prices of both steel bar and re-rolling steel was below Rs. 110,000 per ton but at the moment they are sold at an exaggerating price of Rs. 167,000 per ton.
  • Aggregate Base Course; Usually named as crush or chips in common language, the aggregate base course can be easily got at Rs 7000 per truck nine months ago in Karachi. But now the cost of the same truck has scaled up at Rs. 12,000.
  • Sand; Similarly a truck of landfill sand was available at the price of Rs. 4500 but now it is at Rs. 9000.

Impacts on Construction Industry

In the words of a former Chairman of Association of Builders and Developers (ABAD) the cost of construction on a high-rise project has surged by 20 to 25 % keeping in view a massive rise in these prices. It should be noted only steel bars hold 40 to 45% share in total construction cost of a high-rise project.

Construction industry is not just about trading in real estate properties and plots. It is mainly about mobilizing and investing in housing and development activities. Because when the wheel of construction moves it also runs the 70 plus other allied industries in the country and create employment. Construction industry is the bread and butter of some 2.5 million people in Pakistan and they all are in a fix.

However, more importantly construction industry is about providing shelters to all, which is the basic right of every citizen in Pakistan.


Editorial, Infocus

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