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Construction sector bearing the brunt of high materials costs

Published : Sunday, 24 October, 2021 at 12:00 AM  Count : 881

Construction sector is bearing the brunt of higher material costs in completing both public and private sector projects.
Prices of most construction materials shot up by 30 to 100 per cent in a year as a result in the government sector project implementations are making snail progress while private sector housing projects are in dire peril delaying completion and handing over flats/plots to buyers.
In project tendering process in Bangladesh there is a provision that projects' duration of completion of a project above 18 months will enjoy prices readjustments but at less than 18 months there will not be any price adjustments facilities.
When talking with The Daily Observer, Mohammad Alam, Managing Director, Rana Builders Limited said by passing the tendering process many projects' implementation duration move beyond 18 months and in reality takes four to five years. As a result contractors suffer a lot.
He said, "When we submit tender proposals we provide 10 per cent lesser estimation than the actual prices and after getting the job awards we pay 17 per cent advance income tax, 9 per cent interest on bank loans and there is additional 5 per cent costs in project's site establishments."
"So after paying all the expenditures when materials costs become higher it is a disaster for us to implement project", he said. He said, "Iron rod costs rose by over 60 per cent in a year and in many of my projects as I do not get prices adjustments. It is difficult for me to complete the project and it is far away of making profits."
Alam said currently around 90 per cent of the construction materials are imported and the project expenditures are made by banks loans. In international market, there is significant rise of materials cost and freight costs along with rising depreciation of value of Taka which means more money needed to be paid for importing materials.
If a project takes four years for completion instead of 18 months duration which is not covered by price adjustments, it is difficult to carry on works as prices become two to three times higher than it was at the time of project award.
Meanwhile, a member of Bangladesh Association of Construction Industry (BACI) claimed few rebar manufacturers increased the prices unusually, up to 60 per cent. According to BACI this impacts the whole construction cost. He said this might cause the whole industry to shut down.
The BACI member called the government to take proper action against the syndicates that are involved in hiking the prices and to review the Price Adjustment Clause-27.9 as per PPR as soon as possible. They said otherwise they will be forced to close the construction industry.
Engineer Munir Uddin Ahmed a former president of BACI said: "Some 7 to 8 percent prices can be increased but a 60 percent increase can never be acceptable. All our works require 20 to 25 percent rebar, so if its price increases it impacts the entire cost."










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