High-cost Construction Materials make Low-cost Housing Impossible

by M. Wasim
steel cement

Though, affordable or low-cost housing have been a popular slogan of every government in Pakistan, but it was the Prime Minster Imran Khan who declared it as his “flagship project” in his pledge to construct 5 million houses. However, he and his federal government poorly failed to fulfill the pledge. Keeping aside political justifications, one of the main reasons of their failure to implement housing policy is the unchecked and unstoppable high-cost of construction materials which has made not only low-cost sheltering but even standard housing projects impossible in Pakistan. in his earlier write-up already pointed out the trend of rising construction materials cost and wrote that the low-cost housing seemed no longer “viable” in Pakistan. And, as the prices of construction material have been increased sizably by manufacturers this week, the Chairman of Association of Builders and Developers (ABAD) Mohsin Shaikhani has turned up to criticize this surge and said “forget the low-cost housing even a home for everyone in Pakistan is not possible after these hikes in prices”.

The Steel Sector’ Rigidity

During this week the prices of construction material have been sizably increased by steel and cement manufacturers. First steel makers have increased the prices of steel bars by Rs 8,000 in less than four days to bring the cost at Rs 208,000 per ton. Giving justification the steel manufacturers said the steel bar prices have been revised due to “escalating energy prices and freight rates”. However, it is important to mention the price of steel bars in November 2020 was just Rs110, 000 per ton.

Over the steel prices hike, Mohsin Shaikahni has suggested that the government should reduce regulatory duty and anti-dumping duty which would bring the price of steel bars subsequently down. However, the Chairman ABAD adds “at present government seems unable to do so.”

The Cement Industry’ Cartelization

Second, the price of cement has been increased this week from Rs 787 to Rs 850 per bag of 50 kg. As per data of Sensitive Price Index, the price have jumped enormously up by 29.30% if compared with March 11, 2021. Cement manufactures blame the “rise in coal prices, squeezed supplies and other similar issues” have caused a surge in cement prices which have subsequently led to an increased cost of construction.

However, Mohsin Shaikhani has an otherwise opinion. He says “if the cement manufacturers cite growing imported coal’ prices as a reason for jump in prices, why not they use local coal which will reduce their manufacturing cost substantially.” The implementation of a policy or practice to use local coal is not difficult because there are only 25 cement factories in the country to meet domestic demands in the north and south. But the Chairman ABAD discloses “there is a cartel of cement manufacturing firms who manipulate the prices of cement in country”.

Growing Construction Cost makes Low-cost Housing Unviable

He also referred that the Competitive Commission of Pakistan in December 2020 had already dubbed the All Pakistan Cement Manufacturers Association “as a cartel which fixed cement prices through unlawful process and got 100% to 800% increase in gross profit.”  But each time the cement makers got stay against competitive commission and judiciary retrained the watchdog to take action against cement cartel. “This time”, the Chairman ABAD says “the government must act against them”.

Excessive Cost of Construction

Steel and cement are two significant materials of construction, specially steel which holds 40 to 45% share in total construction cost of a high-rise project. Any jump in their prices also leads to rise in cost of other building materials like tiles, sanitary, wood, aluminum and etc. If the prices aren’t reduced the wheel of housing and construction industry will stop to move.

The Chairman ABAD rightly elaborates “at present work on under construction projects in areas like Surjani Town, North Karachi or even in suburbs are not possible. In these areas construction cost was used to be Rs. 6000 or 7000 per square feet, but now the cost has jumped up to more than 75%. How can we make construction for apartment projects or even a single house with these unchecked and unstoppable surge?”


Editorial, Infocus

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