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Project impacts growing as coronavirus spreads

By Chinedum Uwaegbulam and Victor Gbonegun
09 March 2020   |   4:20 am
With continued spread of the coronavirus globally, one sector that has been worst hit is the real estate and construction world, as the operatives are grappling with project delays and rising costs of materials.

A building site

• Nigeria property developers, contractors worried about disruptions
With continued spread of the coronavirus globally, one sector that has been worst hit is the real estate and construction world, as the operatives are grappling with project delays and rising costs of materials.

The Guardian gathered that Chinese manufactures and shipping are almost grinding to a halt, following several precautions adopted by the authorities. There are also mounting concerns over ordering supplies and fixtures from China—where the sprawling industrial city of Wuhan is the heart of the outbreak.

Industry experts, say that in the coming months, some contractors may have to turn to other more expensive sources—risking project cost overruns—if they’re unable to purchase materials from Chinese manufacturers.

China has been a major source for cheaper building materials. The supply chain issues have started to emerge for products like steel, millwork, plumbing fixtures, electrical fittings, concrete boards, flooring tiles, coatings, wood and doors. Others products manufactured in China are plaster, aluminum, glazed partition systems, cement and cementitious products, paints and HVAC equipment.

In Nigeria, developers and contractors are already feeling the impacts. They’re seeing or fearing domestic project interruptions from materials sourced in China. Some have resulted to local producers to meet their needs while others are importing from Turkey and other non Asian countries.

Property watchers believe that Chinese contractors with major construction presence in Nigeria such as in roads, railways and buildings may experience materials shortfalls.

For the Chairman, Board of Trustees, Real Estate Developers Association of Nigeria (REDAN), Prince Oluseyi Lufadeju said, the impact is yet to be felt.

He stated that Nigeria may face more serious challenges than envisaged as the price of petrol is failing. “With the petrol prices falling now, it will definitely impact on the building materials and other products, which will likely lead to the devaluation of the naira.

He foresees conctractors and developers rejecting materials from China, and opting for more expensive materials. He urged businesses to be forward looking by providing local alternatives.

In his view, the President, Nigerian Institute of Building (NIOB), Mr. Kunle Awobodu stressed that projects are already being impacted due to the scarcity of some materials in the market. Awobodu noted that contractors also tend to have issues with personnel and funding as the Chinese government bankroll some of the projects in the country.

According to the latest findings of Royal Instituton of Surveyors (RICS) international Infrastructure and Construction Surveys, the Coronavirus is likely to weigh on activity in the construction and infrastructure sector globally. It also sees a less direct impact, if containment efforts put in place by the Chinese government restricts the supply of construction materials to other markets, and pushing up costs.

A developer, Mr. John Beecroft told The Guardian that price of building finishing like doors and others have started to skyrocket in the international market. “Recently we started buying our own finishing materials for our project, the prices have actually gone up with about 15 to 20 per cent increase because everybody is complaining that they couldn’t get goods from China.

“I even travelled to Dubai to go and buy materials in bulk; they are complaining that they don’t get supply anymore. Apart from the increase in prices, there is scarcity of varieties of products in the market, which has drastically reduced because most of these items come from China.

“We would have gone to China too, but because of the COVID 19, we couldn’t go. It’s really affecting us but not as bad as two years back when the dollar exchange crisis happened.”

Beecroft, who is the Managing Director of Tetramanor Limited, stated that the unexpected increase has forced them to start looking at the local market and some Nigerian factories are benefiting from it by bringing in alternatives.

“For example, because we couldn’t see varieties of door when we travelled and the fact that they couldn’t give a very reasonable price due to shortage supply. We have decided to patronise a local manufacturer.”

According to him, “some businesses are taking advantage of the situation, which is good for Nigerian companies to fill in the gap. We are already looking to manufacturer who is also assuring us of quality supply of almost 400 doors. But the impact is real on the real estate market.

He further said, “If prices don’t come down, those who will benefit are the ones who are just starting projects because they have the chance to increase their housing prices. Part of the logistics before starting a real estate project is to be able to put in a small margin for safety. If the coronavirus problem is not handle quickly, prices of materials will get skyrockt up to 50 per cent.”

A Director at Echo stone, a property development company, Mr. Sammy Adigun said the impact may soon be felt in Nigeria as it appeared that the real estate is not prepared because a lot of the building materials supply chains are from China.

Adigun said if the situation continues unabated up to May, prices of property development might increase and before there could be a balance, it would be year 2021 because there would be delay in importation and the general supply chain.

He said the real issue is not for developers to consider local materials but the economy of Nigeria that needs to be sustained, stressing that where the purchasing power is low, then it’s not sustainable.

“For you to build affordable homes you need very good supply chain but we don’t have it. The rich wants to go to China, Italy, Turkey and all over the world to buy their finishing materials because they have money but the man that can’t do that, you are not sure when he/she will have money.

“If government releases N22 billion for housing, you can imagine that it would create 22 million jobs and more people will be coming to Nigeria to work. It would also create road, water because when houses are build, you create infrastructure around it and not just the house. No manufacturer knows the demand and needs because it is not consistent”, he said.