Construction Material Prices Increased and its Effect on Real Estate

real estate, Construction Material Prices Increased and its Effect on Real Estate

The real estate sector is one of the most profit-generating sectors in Pakistan and even worldwide. With COVID and fluctuation in the international economy, every industry has taken a fall. Increased construction material prices have also made an adverse impact on Real estate. The price rise has become an international issue, and COVID has stopped everything. However, now the supply chain is getting back on track with everything going back to normal.

Due to the various conditions, the pandemic, and global economic rebounding, everything is facing a stream of increased prices at an alarming rate internationally. The effects of increased costs (internationally) have an adverse impact on the property in Pakistan.

Global economic rebounding means that when all trades worldwide are closed, it causes a considerable setback to the world economy. Therefore, when everything starts opening up again, everyone desires to mend for the loss they had faced for the last two years. Consequently, they increase the prices of materials to get back to their foot as they were before the pandemic.

Therefore, a rise in prices has occurred on an international level; every industry, every person is affected by it. The increased prices rate in Pakistan is enormous, and it is the primary reason why the property prices, along with the construction services and operations, have skyrocketed. This affects the overall value of real estate in Pakistan.

Importance of the Real Estate sector in Pakistan’s Economy:

The construction of properties is one of the highest profit-generating industries in Pakistan. According to the World Bank calculations, the property market in Pakistan is worth $300 to $400 billion. Moreover, the entire fortune of the properties in Pakistan is around 60% to 70% of Pakistan’s total assets.

Impact of Increased prices on the Real Estate Sector:

In the past year, construction costs have increased by 21%. The prices of building materials have increased by about 30%. Therefore, the cost of a house for sale in the market has increased drastically, which hurts the people and the Real Estate sector. Below, we discussed the impact of increased prices on the real estate sector.

The increased cost of construction material:

As with everything else, the cost of the construction material has also increased drastically. Because of this, project construction prices have surged a lot more. Developers are having second thoughts on the project due to their budget. This reconsideration of the developers negatively impacts the investors’ market in the real estate industry.

Increase cost of construction Machinery:

Along with the construction material, the hefty construction machinery has also increased in prices. These construction machinery are an essential requirement for constructing a project, whether it is large scale or small scale. The rates of these Machines have skyrocketed rapidly, and this has caused delays in massive projects because it has disrupted the developers’ budget.

The increased cost of Labor:

Due to international inflation, Pakistan’s daily necessities rates have increased dramatically. Things like cooking material, sugar, flour, vegetables, and meat have risen more than twice in just a month. This has affected the daily budget of the ordinary person, which has affected the cost of Labor services. The labor workers demand a higher salary because of inflation in the daily necessities. This is because it is impossible to live with such low wages. This increase in Labor also increases the cost of projects which gets delayed due to inflation.

Projects at halt:

All of the above reasons cause the projects to get delayed or halted. All of this is because of the sudden surge in the prices, which has affected the cost of development in real estate. With the increase of oil and labor charges, people are busy evaluating the new total cost of construction projects. Many developers have put their projects at a halt to review and lower the budget. Many among these are projects that were supposed to be complete by now. Hence, inflation has had an adverse effect on the real estate sector in Pakistan.

Conclusion

Inflation is an international issue. Most construction materials like cement, wood, tiles, sanitary and electric fittings are imported materials. These materials cost more than usual due to increased exchange rates and import tariffs. Due to this, rates of material are too high. Real Estate is a great option to invest in, if you are looking for safe and viable investment opportunities in Real Estate then visit our website.

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