Operators in the real estate sector have said the hike in prices of cement and other building materials may trigger a drop in building standards of houses.
Industry chiefs in separate interviews with our correspondent noted that the recent price hike of building materials would increase costs of production, reduce the company’s profits and affect the viability of the sector’s value chain.
The Managing Director and Chief Executive Officer at Fame Oyster & Co. Nigeria, Femi Oyedele, told The PUNCH that the surge in the prices of building materials might force project owners to review contract conditions.
He said, “Definitely, contractors who have started building projects will be going back to their clients (project owners) to review the contract terms. The increase in the price of cement will affect the conditions (price and rate of completion) of building projects. It will also affect the demand for building products as the increase in prices of cement will affect prices of houses.”
Similarly, the Chief Executive Officer of Seven30 Real Estate Limited, Oluwole Fapohunda, said firms would have to factor in the increase to arrive at their cost of production, which in turn would affect the sales price.
Oluwole emphasised the crucial role of cement in the construction industry, highlighting that builders might have to compromise on the quality of materials if homebuyers are unwilling to pay higher prices for houses.
“One of the things we have to understand now is that to have quality, customers have to be ready to pay for more, but if buyers are not ready to pay more, it means that the developer may be forced to reduce the quantity used during construction, which will not end well, because there is an adequate ratio of cement that needs to go into the construction process.
“Another implication is that developers that cannot stand their ground on quality may be forced to lower the standard, which may eventually result in more building collapses.”
He further urged the government to intervene to avoid investments going down the drain.
“The government has to look into these issues and make sure they find a way to bring the cost down. Do not forget that as the prices of cement are going up, the prices of iron rod, transportation, and the rest are also going up,” he said.
On his part, the Managing Partner, Ubosi Eleh and Co., Chudi Ubosi, cautioned that the price hike was likely to shrink the company’s profits.
He added, “Changes in the prices of building materials, including cement, will indeed impact ongoing projects. Many times, a developer or company will bear the cost of these surges, limiting profits.”
While anticipating an increase in rent and the prices of property, he asserted that they would not happen immediately.
The Chief Executive Officer of Samak Properties and Development Company Limited, Sam Akanbi said, “Implications of the increase in the rising cost of cement are enormous.
“Aside from the economic implications, which will lead to the high cost of construction, decrease in housing supply, loss of jobs in the building industry, delay in project delivery and increase in the number of abandoned projects, it will also lead to compromise in the standard of materials being used. Therefore, building collapse is inevitable. The implication is huge. Mr President needs to put on his thinking cap.”
To resolve this, CEO Femi Oyedele charged developers to seek alternative means to reduce the usage of cement.
He suggested that builders should consider the adoption of gum for tiling, Plaster of Paris for rendering and bricks and stones to replace blocks.
“We need to adopt gum for our tiling, Plaster of Paris for rendering and bricks and stones to replace blocks. We can also use plasterboard and timber for our partitioning to reduce our dependence on cement for building projects,” he noted.
Market research conducted by our correspondent showed that 50kg bag of cement product was being sold at prices ranging from N4,800 to N6,000 in cities like Lagos, Ogun, Ondo, and Abuja. In certain locations, it can even be found for as low as N4,700 to N4,850.
Although no official statement has been issued to confirm the increase, retailers had blamed the latest rise in prices on the significant surge in logistics and haulage costs due to fuel subsidy removal.
Distributors also claimed cement manufacturers had reviewed their prices upward.