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Developers and firms in dilemma over rising cost of building materials

“Efforts at improving the nation’s construction industry for the past few years may have suffered a setback, as property developers have recently seen an increase in the cost of building materials shoot up projects prices.

Building firms and professionals currently witnessing slow transactions in the real estate sector are now grappling with a 150 per cent rise in material prices caused by the depreciation of the naira and high exchange rates, according to an investigation by The Guardian.

Nearly 80 per cent of all materials used by the Nigeria’s construction industry are imported and costs are expected to increase further as the exchange rate now stands at N506 to a dollar. Experts are warning of dire consequences in the construction industry, if imports of building materials are left entirely to the vagaries of free market forces.

Similarly, local manufacturers of building materials such as cement, tiles, paints and iron rods have also increased prices of their products due to shortages of industrial fuel such as low pour fuel (LPFO), automotive gas oil (AGO) and natural gas.

There are fears that as building works get more expensive, homeowners may have to compromise on aspects of their project if some materials become too pricey – the cost of cement has already increased by 200 per cent, iron rods by 120 per cent and timber is up by 20 per cent. Prices of imported finishing products such as tiles, roofing sheets, sanitary wares and doors have also hit the roof.

For instance, cement price, which increased from N1500 to N2,350, has now gone up to N2,600 in Lagos area; the cost of rod has skyrocketed from N170, 000 per ton to N300, 000 and

The scenario has worsened government’s projections to reduce the nation’s housing deficits, providing affordable housing to the teeming population and encouraging homeownership through site and services schemes. Housing schemes by government agencies are now beyond the reach of average Nigerians.

Experts say, government must put in place policies that will lower materials costs.  President, Nigerian Institute of Quantity Surveyors (NIQS), Mrs. Mercy Iyortyer who confirmed the development, noted that uncontrollable increase in the prices of construction materials is a big challenge on project estimates in recent times; resulting in constant upward variations of construction costs and high costs of new projects.

As quantity surveyors continue to add value to clients by closely monitoring these increase and giving professional advise, Iyortyer called on government to urgently put in place policies that will lower and stabilize construction material prices to save the industry.

Also, President, Nigerian Institute of Building (NIOB), Tijani Shuaib said the high cost of building materials has reduced the purchasing power of the prospective clients, who patronize them as estate developers.

Shuaib, who is an estate developers said: “For example, the cost of rod has skyrocketed from N170, 000 per ton to N300000, thereby making the price out of reach to people. The high interest rate from mortgage is also a factor that even when the houses are built, you cannot find buyers.

For majority of their members, who are civil servants and constitute 70 per cent of NIOB members, he said the increase is already impacting negatively on government owners occupier house scheme, which many leverage to own their homes. Many of them, he said, are backing out because they cannot pay the increase with the remaining number of service years.

President, Nigerian Institution of Structural Engineers (NIStructE), Oreoluwa Fadayomi, said the high cost of building materials has impacted severely on projects that many projects are now stalled and clients could no longer continue as a result of high cost of all the building materials.

In some case where reinforcement is required the budget keep increasing on weekly basis that many developers decided to stop. The resultant effect of this, he said in ability to meet contractual agreements in terms of repayment of credit facilities and payment of salaries.

“Another dangerous trend is that many developers and engineers have resulted to cutting corners to ensure that they remain in business in order to feed their families and make ends meet. The resultant effect is that proposed materials may not meet specified standards due to high cost.”

He cited instances, if you need 3O bags of cement to mix certain measurement of gravel, you may need to reduce to 15 bags in ensuring that projects are not abandoned.

The Executive Secretary, Paint Manufacturers Association of Nigeria, Mr. Jude Maduka revealed that there is general rise in the prices of everything in the market due to the dollar situation and coupled with the fact that majority of the raw materials used in manufacturing paints are imported and so for the manufacturers remain in business, they have to increase price marginally.

“Prices of things are increasing and paints should not be left out. Our members are increasing prices but not to the extent of other items.  Prices of raw materials have increased to over 100 per cent and we don’t have option that to increase prices marginally too, in order to have some profit. We must also understand that the things that goes into paint production are also many”, he stated.

“ A tonne of titanium used to be N750, 000 before but is now N1.8million, which is over 140per cent rise in price. The tonne of the additives used to be N2, 000,000 before but is now N4.5million. Calcium carbonate that is produced locally which used to be N30.00 per kilogram is now N200.00.

A leading building materials manufacturer, Afam Mallinson Ukatu, who is also the managing director of Mallinson and Partners Limited said: “Nigeria remains the only country where natural gas are charged in dollars for local manufacturers. With the current charge on natural gas it is difficult to manufacture goods in the country.

“We have been clamouring that local manufacturers be charged in local currency to reduce cost of production. It is taking many of us away from business. That is the main cause of the high cost of building materials in the country.”

Source: The Guardian

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