ISLAMABAD – The construction and real estate industry is adapting to a roller coaster economic scenario as the prices of basic building materials persisted at a steady plateau this week. The knee-jerk market fluctuations that were experienced during the past couple of months have subsided at least for now, but the overall procurement cost for cement and steel has frozen at a costly new normal.
Based on daily trade activity in key supply corridors from Lahore, Karachi and Islamabad; the grey cement pricing remains intact within the level of 1,500-1,610 Rs/50kg bag across different geographies owing to transport costs and brand specific manufacturing origin. Major players like Bestway, DG Khan, Maple Leaf and Lucky Cement are traded in the range of 1,515-1,590 Rs/50kg bag throughout general retail networks with about 1,700+ Rs/50kg bag being available for high value sulfate-resistant product. Regional prices haven’t deviated much with southern supplies cheaper by few Rupees/50kg bag closer to the seaport facilities and northern channels bearing some freight premium.
At the same time, domestic steel rebar prices, which had been “flat for the last several weeks,” have plateaued. Benchmark Grade 60 steel reinforcement bars, which are most commonly used to provide structural integrity for modern multi-storied buildings and housing complexes, are trading around 277 rupees ($4.28) per kilogram, or approximately 277,000 rupees ($4,283) per metric ton at mill-gate levels. Grade 40 steel reinforcement bar trades just behind at 275 rupees ($4.24) per kilogram, or approximately 275,000 rupees ($4,245) per metric ton. Steel rebar pricing has been unchanged due to imports of scrap metal flowing into the system in good volumes and stable inventory levels while the high cost of production limits downward movement.
What you see here are the immediate weekly numbers but what is also already visible is a structural change in Pakistan’s national building economy. Sustained inflation, depreciation and increasing utility tariff have adjusted the real estate development price for the one last few years. Long-term market monitoring shows that the grey cement, for example, which was selling for a little below Rs700/bag just five years ago has more than doubled, the price of the steel reinforcement bars has also increased by a similar proportion, aided by higher international scrap prices and domestic electricity tariff changes that directly impact the heavy induction melting and rolling mill process.
As for individual property owners this escalation represents a huge increase in the amount of capital necessary to build a standard grey structure (complete with foundation, walls and slabs). Industry rates state that even for a simple one storey 1,000sq foot residential layout 400-450 bags of cement are used for structural foundations, slabs and walling – ensuring individual property developers already need an upfront baseline outlay of over 650,000 rupees alone in cement alone at current pricing before steel re-bar and other consumables.
Consequently, the composite latest construction cost estimates for contemporary complete construction-structural grey work along with basic interior finishing-now hovers in the range of 3,000-3,250 rupees per square foot for city markets. Standard five-marla typical private dwelling comprising gross construction area of around 1,350 square feet now often necessitate a minimum investment of anywhere from 5.5 million to 8.5 million rupees (without GST), according to industrial standards, while scaled-up standalone ten-marla and one-kanal homes are substantially higher in the double-digit range of tens of millions of rupees, Industry specialists recommend that builders verify fresh bills of quantities and reconcile weighbridge slips firsthand with principal leading dealers to trade better through the buildup scenario.