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Prices of building materials increase by 300 percent, worsening housing deficit

By Victor Gbonegun
13 September 2021   |   3:05 am
These are not the best of times for potential homeowners and developers as a sharp increase in prices of building materials across the country may further compound the existing housing deficit

Uncompleted buildings

These are not the best of times for potential homeowners and developers as a sharp increase in prices of building materials across the country may further compound the existing housing deficit in the low/medium income segments of the real estate market.

Access to affordable homes is fast becoming an unfulfilled dream to the majority with the gaps growing from bad to worse while efforts of governments haven’t yielded the much-desired result.

Besides, issues such as low finance inflow to the industry, slow administrative procedures, high cost of registration, shortage of skilled labour, bad policies and others have remained unresolved over the years. The nation’s inflationary trends and economic disruptions fostered by the COVID-19 pandemic haven’t helped the sector.

The cost of raw materials such as reinforcement, cement, finishing, paint and other components rose by over 300 per cent in recent times. With higher project prices, which include material and rising labour costs, the construction industry struggles as activities are postponed, reviewed or projects are cancelled. For every construction project, over 30 cent of the total cost goes to material purchase; this value is dependent on the taste and design of the projects. A one-bedroom apartment that can be developed with N2.5 million besides the cost of land last year now costs over N4 million.

The few developers, who can continue housing development, pass the material cost increases onto customers who pay higher housing prices.

The price of cement had reached an all-time high of N5, 000 per 50kg bag before stabilising. Presently, in some locations in the Southwest, the price ranges between N3, 800 and N4, 000 per bag. In Southeast, the same bag goes for N3, 200 while in the North a 50kg bag starts from N3, 900, depending on locations.

An increase in prices of reinforcement has also sent shivers down the spine of private developers, leading to low patronage and confusion among contractors, whose earlier scheduled quotations of materials are now in dissonance with current market realities.

The Guardian market survey last weekend showed that price also increased in the past two months, thus inflicting more pains on developers, who are already affected by declining revenues. The price of 12 and 16mm Iron rods moved from N260, 000 in April to N415, 000, 00, while 10, 25, and 20mm, which were sold for N355, 000 currently sell at N425, 000. The 8mm moves from N355 to N420, 000 per ton.

A dealer, Mr. Kayode Ilesanmi who spoke with The Guardian explained that the price of cement has continued to fluctuate in recent times from the factories as major manufacturers blamed the development on the cost of production, poor power supply and harsh economic policies.

He noted that it was only in the last two weeks that the price became stable.

On his part, an Iron rod seller, Mr. Ola, explained that the rise in the price of iron rods was due to the fact that producers tried to upgrade the standard, aside from the fact that there is inflation everywhere, which also affected the building materials market.

He said: “The inflation cuts across the board, including the food we eat. This will affect the production of houses in the long run. We are experiencing low sales because the source of income for the people hasn’t increased. The standard of iron is now improved. Earlier in the year, there were a lot of substandard products in the market. The products in the market now are ‘ordinary local’ but they are of quality standard, although expensive.”

Immediate past president, Nigerian Institute of Building (NIOB) Kunle Awobodu said an increase in the price of materials affects projects negatively because before embarking on a project, there must have been a budget, adding that increases that were not unanticipated will affect the budget, slow down the project and translate to the fact that money allocated will not be enough.

He said if projects are not completed in time and to satisfaction as a result of fluctuating prices of materials, there will be low output and the number of buildings will not be attained.

“Except in projects where there are a lot of reserves, the shortage in the housing sector will continue.”

Awobodu disclosed that the institute is working on alternate building materials that could be deployed especially, piping, cement, walling materials and others, to cushion the effect of the price increase.

According to him, if firms producing some of the building materials being imported could establish their factories in Nigeria, the cost of haulage, which contributes to a hike in price, would be eliminated.

He said: “Our major problem is that we are importing heavily from abroad and this is negatively impacting the economy. Some of those producing locally import their spare parts and billets into steel production. This can be overcome if we source our iron ore internally and that is why we pray for Ajaokuta steel to become effective.”

The Managing Partner, REFin homes, a property development firm, Mr. Kazeem Owolabi said the development has imposed about 80 per cent negative impact on housing projects.

According to him, the cost of reinforcement, a material used for the structure stage of housing development, has gone beyond the affordability bracket.

Owolabi said: “The price of an iron rod is high right now; granite, water closet system, pipes and cement, has really gone up and the cost of haulage is also going up. There is a need for collaboration between the developers and building materials operatives. There should be coordination among building materials associations who are supposed to bring all the players together for deliberation on incentives concerning building materials. Those are the kinds of things we expect in the industry now. Also, there are too many fake and inferior building materials in the market. You keep buying finishing, most of them are not quality materials”

“There is going to be a great deal impact on the existing deficit. Sometimes you look everywhere and see a lot of empty buildings in some areas but the issue is they are not what the people want because of lack of financial capacity. If you build and people can’t own the building, nobody will occupy it, yet, there would be a shortage because there is a mismatch. If you are not producing houses due to shortage of materials, it will have a great impact on housing stocks.”