HOUSING MARKET: RISING CONSTRUCTION MATERIAL PRICES & ITS IMPACT
For a country such as Bangladesh which is ever growing in terms of population and GDP, meeting housing needs as per demand was always a challenge. In such perilous situation when housing supply was struggling to keep pace with the rapid urban growth, pandemic happened. Now, as the economy crawls back to normalcy amid the coronavirus pandemic, the surging prices of building materials is threatening the country’s housing market.
Cost of almost all the construction materials such as steel, cement, coal, and stone increased significantly owing to factors such as increase of freight charges, hike in fuel price, unavailability of cargo ship, etc. This has led to increase in the construction costs (which comprise of around 50% of any overall project), by around 20% and this upward trend of cost is expected to sustain till mid-2022. The cost of mega construction projects undertaken by the government such as Padma Bridge and Elenga Road Project has increased multiple folds due to surging material prices. It has also left many developers unsure about their future residential and commercial projects. Contractors of development projects are now hesitant to bid for their new projects and are demanding price adjustments for their ongoing projects.
The housing market, however, is in its phase of rebound, thanks to certain government policies such as lower interest rates cap for banks, reduction of registration fees, etc. Along with this, recovery of the overall economy will surely make this industry come back strongly.
RIFAT ISHTIAQ KHAN
IDLC Finance Ltd.