The construction industry of Pakistan is in a state of panic. We again fear a rise in steel prices. In the last 12 months, steel prices have increased by more than Rs. 70,000/ton. Between January 2020 and November 2021, steel prices, on average, have increased almost 100%.
Cement bag’s cost has increased by Rs. 176/bag in the same time. Prices of other components directly utilized in the construction sector are also increasing.
Overall construction costs increased by around 70 – 75 percent in the last 12-14 months, out of which the rise in the steel prices alone is responsible for an increase of Rs. 550/sq.ft in construction costs.
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These steep rises have disrupted all project expectations and are adversely affecting the relationship between the builders and the end-users who have to purchase and who were making advance payments.
This situation will have a huge impact on the PM Housing scheme, where the government had promised to provide three Marla housing units to less privileged sections of society in the price range of Rs. 1.8 million to Rs. 2.7 million. Everything is now at risk.
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There is evidence of cartelization amongst a few powerful producers in the steel and cement sectors. The issue of cartelization is also spreading in other sub-sectors like sand suppliers and tiles.
The government of Pakistan had done the right thing by creating the Competition Commission of Pakistan several years ago. Initially, it looked like a functional institution, but its current chairperson and leadership are watching all these industry collusions helplessly.
Either no corrective decisions are being taken, or they are not succeeding.
If anti-competitive behavior is not to be checked, then the Imran Khan government should disband the Competition Commission of Pakistan and other dysfunctional and loss-making government bodies. In turn, these resources can be used for providing tax relief to the construction sector and the people of Pakistan.
The construction sector was finally declared an industry by the Imran Khan government. Forty industries are directly related to construction, and another 30-32 are indirectly part of the construction economy.
The government took many initiatives through its low-cost housing program, which started to stimulate the construction sector and its allied industries and brought national and overseas investments. However, the steep price escalations in the steel, cement, and other construction-related industries are now a clear and present danger for Prime Minister’s Housing scheme.
These increases will disrupt all cost calculations estimated to deliver the low-cost housing projects undertaken to give the ordinary person in this country a house. PM Imran Khan is not being given the correct picture by his team. He needs to take immediate actions to control cartelization, bring down the costs, and help the construction sector contribute to the national economy, as was his vision to begin with.