Operators in the construction and real estate sector have expressed concern over the impact of economic shocks and government policies on the industry, saying many contractors are being forced to review contract terms to remain in business.

They noted that construction costs have risen sharply by nearly 20 per cent since December due to the surge in prices of building materials triggered largely by the Iran-Israel conflict, which has increased the cost of iron rods, cement, diesel and labour.

Speaking during a webinar entitled “What Does the Iran-Israel Conflict Mean for Africa’s Real Estate and Construction?” organised by Fortren & Company in Lagos, the Managing Director of Dutum Company Limited, Temitope Runsewe, said fixed construction contracts have become unsustainable under the current macroeconomic and geopolitical realities.

According to him, contractors have now adopted a “phase-by-phase” contract structure that allows periodic review of market indices and price adjustments.

“That strategy has worked for us. Over the last three years, we stopped signing fixed contracts from beginning to the end, except that a client is willing to pay 100 per cent upfront,” he said.

Runsewe explained that contractors now adopt flexible pricing arrangements based on project milestones and prevailing market conditions.

“If a client gives me N2 billion out of a N10 billion project, we determine the extent of work that amount can cover and fix the contract only for that phase. At the point of agreement, we establish baseline prices for cement, reinforcement, diesel and petrol. Once we reach the agreed milestone, we reassess the indices and adjust pricing if there are major market shifts,” he said.

He added that advanced procurement strategies have also become necessary to reduce exposure to volatile exchange rates and rising import costs, especially for finishing materials. According to him, some materials can be secured in advance, but others, such as concrete, cannot.

Runsewe stressed that contractors now require creativity, flexibility and careful client selection to survive the economic turbulence. “Some clients may become upset when prices are adjusted, but transparency and integrity in engagement have helped us sustain projects and maintain relationships,” he added.

President of the International Real Estate Federation (FIABCI) Nigeria, Akin Opatola, said developers and contractors are facing difficult times, noting that trust and credibility have become critical in navigating industry challenges.

He described the Iran-Israel conflict as a global crisis with severe implications for African economies, despite the continent having no direct involvement in the war. “The conflict is repricing construction projects, development budgets and investment decisions across the continent,” he said.

Opatola observed that luxury real estate has become more expensive, with dollar-denominated rentals and property sales rising significantly, while affordable housing has become increasingly inaccessible.

“The affordable and social housing segment has become even more unaffordable. Conversations around addressing housing shortages will now take much longer to achieve,” he stated.

He added that although the property market recorded relatively strong transactions last year, activity has slowed significantly due to the combined effects of economic reforms and geopolitical tensions.

“We have seen transactions slow down from both rental and sales perspectives, while developers are struggling on the supply side,” he said.

Research Director at Fortren & Company, Martin Uche, said the economic effects of the conflict are being felt beyond construction sites.

“Even individuals who are not directly involved in construction are beginning to feel the impact through rising diesel costs, transportation expenses and higher household running costs,” he said.

Uche explained that multiple economic shocks have weakened purchasing power, thereby affecting real estate transactions nationwide.

“One of the strongest impacts is the slowdown in transactions because purchasing power has already been severely affected by prevailing economic policies and shocks,” he added.

Founder and Chief Executive Officer of Venco, Chude Osiegbu, noted that facilities and estate management operations have historically been exposed to foreign exchange fluctuations.

According to him, the ongoing geopolitical tensions have further worsened operational costs. “Fuel costs, especially diesel, have always been dollar-linked, but now we are also seeing direct geopolitical exposure. Diesel prices are approaching N2,000 per litre,” he said.