Effect of current economic turmoil on house construction cost and industry

Effect of current economic turmoil on house construction cost and industry

House construction sector is the backbone of any developing or developed economy in the word that directly and indirectly generates millions of jobs and opportunities and help in keeping the economic wheel moving. During the COVID pandemic when every other industry was at complete halt, construction was up and running and helped labour force to earn their living. In recent economic turmoil in country, construction sector has been hit very hardly as a result of which house construction cost has increased drastically. In this video we will explain what is going wrong with the house construction cost and sector due to negligence of concerned authorities. Currently house construction cost and the prices of main construction materials such as cement, steel, crush and sand are literally out of control. Soon the bricks prices are going to be out of control too. Let us analyse each material separately:


Cement sector belongs to a powerful cartel, they create the artificial gap of supply and demand in market whenever they wish to increase the prices of cement bags at their will. By 5th June 2022, cements official price range in Lahore region was 865-890 Rs/bag. Cement was easily available in bulk quantity in market at retail or dealership. Suddenly after 5th June 2022, cement bags were nowhere to be found in market, and the dealers who had a few stock left, started selling in black up-to Rs1200/bag. Todate, the artificial gap in market continues and each dealer or shopkeeper is selling the cement at his own rate and terms. Icing on the cake was breaking news which we though we would be proud of, export of cement to the US by DG cement. According to this link by Developing Pakistan facebook page DG CFO Inayat Ullah Niazi stated that 50000 tons of cement will be exported to US and the ship is currently loading the first lot as we speak at Karachi port for delivery to Houston, US. Being a Pakistani, we should be really proud of this export however it is the responsibility of state to ensure that domestic user is not effected and the price per bag of cement remains in control. Unfortunately this is not happening at the moment and domestic users are cursing the govt as well as the cartel.


This is the most important and expensive material that is used during the construction of house. Steel prices has already witnessed a very sharp increase in previous one and half year. In early 2021 it was at 107000 Rs/ton, by the end of 2021 steel prices were trading at 193000 Rs/ton. The prices remained stable around this figure for couple of months but currently in June 2022, steel prices for grade 60 in and around Lahore are at 230000 Rs/ton. With the expected price hike in diesel/petrol and increase in taxes on various raw materials that are imported and required must in production of steel, it is being forecasted that steel will go to minimum 250000 Rs/ton in coming 2-3 months.


Just like cement and steel, prices of crush (course aggregate) have also remained unstable in last one and half year. In Pakistan course aggregates are crushed from the mountain ranges of Margalla and Sargodha. Majority of the demand is supplied from sargodha crushing stations. Good quality of graded crush from Sargodha was available in Lahore at the rate of Rs 75/cubic ft in early 2021, which jumped directly to 95 Rs/cft by December 2021 and remained stable of few months until currently when it is available at around 120 Rs/cft. Its being forecasted that if diesel prices are increased, these prices will to a minimum of 130 Rs/cft in coming 2-3 months.


Prices of sand are only dependant on the prices of diesel. Currently good quality Chenab sand in Lahore is available around 38-48-Rs/cft however same sand in early 2021 was easily available at 28-30 Rs/cft.


Team Overc’s recorded a detailed video on 2022 grey structure house construction cost in which we compared & told our viewers that since 2017, first year when we uploaded detailed grey structure cost video, grey structure per sqft cost was around 1150 Rs / sqft. Which jumped to around 1859 Rs/sqft uptil Feb 2022. Currently at the time we are writing this article, in June 2022 the grey structure cost per sqft has gone up to 2125 Rs/sqft at minimum. An abnormal increase of 266 Rs/sqft in last 3-4months only. This is all due to the political, economical uncertainty in market and the arbitral and dictatorial acts of the cement and steel cartel. Common man who is building is house in his limited resources is already out of his budgets before completing his house. Service providers and companies who have done contracts with clients without escalation clauses are in disputes with their clients. It is chaos all around in this sector and no state department or authority is awake enough to take notice of what is going on and how people are suffering due to bad and ill decisions of few of the elites and decision takers.

What should we do in this situation?

If you are building your house yourself on labor contract by providing the material yourself, please accommodate and adjust minor rates to cover extra fuel expenses only with your labor contractors as it is becoming really difficult for them to earn their daily livelihood. If you are at a stage where you can book your material and offload it on site in advance, you should go for it but remember that cement and steel should not be offloaded in bulk as the cement will get wasted after 25 days and steel will start getting the rust. Plan the roadmap and speed up your construction and offload material on site that you can use in maximum next one month. If you are at finishing stage, its better to buy and store the finishing material including all steel and ceramic fixtures. But if you are at such a stage that you will need these materials after 5-6 months, then its better to hold as possibly the situation will get normal after 3-4 months. Although the prices will be more but saving such materials on site for this much time is not advisable.

If you are a construction company that has given lump sum or per sqft rate to your client or vice a versa and price escalation clause has been mentioned clearly and communicated to client at the time of agreement, the client is bound to pay the escalated material cost to the construction company, however if no such clause was mentioned in agreement, then the matter should be mutually discussed between the client and the construction company and a middle way should be adopted and both the client and the contractor should bear and divide the cost equally between them. There are very few or almost none well established house construction companies in Pakistan that can bear the recent escalated cost in their per sqft or lump sum contracts. And as a client you must remember that it is your property that is being built which you will use for next few decades, the company or the contractor will build your house and leave the premises. To maintain the construction quality think and act wisely in this situation.



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About The Author

Mohsin Munir
Holding a degree in BS EE (Electrical engineering) and astounding knowledge of house construction business since 2010, wide experience and relevant expertise in the construction business. Believe in research based strategy while holding a distinguished position in the construction market. Started at a small scale in 2010 and recognised among the top builders and contractors in Pakistan now, especially among the expatriates and overseas Pakistanis who always trusted in our commitment and services.

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