Price Hike of Construction Materials & its Impact on Local Real Estate Sector in 2021

Price Hike of Construction Materials & its Impact on Local Real Estate Sector in 2021

2021 had been drastically unpredictable in terms of inflation and taxes. We have recently observed a 17% increase in taxes of around 144 goods. The basic decrease in rupee valuation and increased debts of the economy bring inflation to normalize the economic crisis. Due to all those reasons, the Real Estate factor faces a price hike in projects. There are a few ways to own any property, i.e. buy at once from buyer to seller, buy from any builder at once, the third is a most famous way of owning any property is to pay in instalments while the builders gradually construct the project. This third way which covers more than 50% of real-estate business, suffers most due to uncertain prices of raw material and construction material.
The manufacturing factories that prepare the small parts and construction material uses fuel to produce the items. The hike in prices of all fuel and petroleum apart from additional taxes has brought the price graph to the upper end.

In 2020 April, real estate and construction were given a weightage of a business or industry. Meanwhile, the amnesty scheme gave a boost and energy to strengthen the real estate from its foundation. Withholding tax was waived off for construction services and building material except for cement and steel.
The scheme brought so much activity that the government stretched it for another year. As of September 2021, as many as 2,125 construction ventures worth PKR 493 billion were recorded with the Federal Board of Revenue (FBR) under this package.
According to multiple plans and projects, many gave their tentative completion date in 2023. Unfortunately, Covid turned the tables in 2020 and most mindsets got changed and lack of continuity in the industrial sector brought the inflation boom. It almost engulfed most of the positive aspects of the construction industry rather than turn them into negative ones. People who previously thought about owning an apartment in a high-rise building started thinking to own a separate house. The priorities got changed in most of the industries and the construction industry was one of the most affected industries.
The basic construction material prices are increased and price hikes in mega projects give rise to controversies about the completion dates and quality of the material that will be used to complete the projects.

Bricks are one of the oldest and most necessary building materials. The cost of bricks mainly depends on the size and consistency of the material. The three categories of bricks in Pakistan are; Awwal Eent, Doem Eent (rough surface), Khangar Eent
The standard size of these bricks are measured as Length x Width x Height = 9 x 4 x 3 Inches. Since 2020, the prices of bricks have undergone a 40-50% increase per thousand units
Steel is required for the foundation of every building. Presently per kg Grade-60 steel bar prices has increased from Rs. 110 to Rs. 190, which is a 70% increase as compared to last year, since it is required in tonnes, the increase in steel prices has given rise to overall construction costs by millions.
Similarly, almost all construction materials soar the price hike due to high demand and fewer manufacturers in the market.
Giving the title of the industry to the construction sector should not be the only act in this domain, the anticipated increase in the market could have been balanced through prior planning and price regularization. Let’s hope for a better future of Construction and a real state free from Covid and Inflation.

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