Construction activities slowing down

Political uncertainty, geopolitical turbulence encouraging builders to halt new projects

KARACHI:

Construction activities in the country have slowed down over the past three months mainly due to a steep surge in the cost of construction material particularly, steel and cement.

“The demand for steel bars has dropped 20-25% over the past two to three months,” Amreli Steels Chief Operating Officer Hadi Akber Ali said while talking to The Express Tribune.

He noted besides the steel industry, other kinds of construction material such as cement, woodwork and other allied sectors had also witnessed a setback in their demand in the recent months.

According to him, construction activities recorded a slowdown mainly in government projects as builders and developers suspended work on public infrastructure and housing schemes in different cities of Pakistan owing to a spike in cost of construction material.

For instance, the price of steel bars has doubled to around Rs200,000 per ton since the government unveiled amnesty scheme for the construction industry around two years ago to help Pakistan’s economy cope up with the adverse impacts of Covid-19 pandemic.

Besides, the ongoing political uncertainty in the country coupled with global geopolitical turbulence was encouraging builders to halt the initiation of new projects, he said.

The slowdown in construction activities was partly seasonal given that pace of work turns sluggish during the winter season, he added.

However, construction activities are facing a notable dent for the first time since the government introduced the incentive package to aid construction and allied industries, create employment opportunities for daily wage earners and revive the Covid-hit domestic economy.

Ali said that steel bar manufacturers kept increasing prices from time to time due to persistent uptrend in their cost of production.

“The cost of raw material for steel bars has skyrocketed 130% in the past two years.”

On the other hand, power tariff has soared by 70% in two years. He detailed that the share of electricity in the total cost of the bars production amounts to around 25%.

On an average, the annual demand for steel bars in Pakistan clocks in at 4 million tons, he said.

Steel manufacturers have urged the government to reduce tax rates so that businessmen could cut their product prices.

It is pertinent to mention that share of taxes in retail price amount to around 20-23%.

Moreover, the industry works on bank financing however the cost of loans has risen two fold in the recent past, he said.

He was of the view that a drop in global commodity prices might help reduce the cost of construction material, he said.

Published in The Express Tribune, March 20^th, 2022.

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