Construction costs decline on falling prices of materials

Construction costs in Bangladesh declined for the second consecutive month in October, driven by a fall in the price of building materials, official figures showed.

Prices of building materials have fallen due to lower market demand, according to the market players.

The Building Materials Price Index (BMPI) stood at 6.62 percent in October, a decrease of 9 basis points from 6.71 percent in the previous month, according to data from the Bangladesh Bureau of Statistics (BBS).

In August, the BMPI stood at 6.98, the highest this year, showed data from the state-run statistical agency.

The BBS released its updated BMPI after compiling the cost of three key components, namely building materials, transport and labour charges.

Of these components, the price of building materials declined to 6.83 percent in October, a month-on-month decrease of 0.13 percentage points compared to September.

On the other hand, growth in labour costs stood at 6.07 percent, up by 0.02 percentage points from September. Similarly, transportation charges increased slightly to 5.58 percent in October from 5.52 percent, BBS data showed.

"The price of building materials has slightly reduced as overall market demand has slowed," said Bimal Chandra Roy, president of the Bangladesh Association of Construction Industry (BACI).

Currently, many projects have already been completed and many have slowed, said Roy.

Similarly, alongside government consumption, many private consumer and retail consumers have also reduced overall consumption.

"Similar to ups and downs in market demand, prices of building materials also go through ups and downs every year. This time, we have witnessed the same."

Retailers try to sell their materials at a low cost, said Roy. But the BMPI may rise again in the coming months if demand rises, said Roy, also managing director of Next Spaces Limited.

Besides, labour charges have increased due to a scarcity of labour. As it is the peak season for Aman paddy harvesting, workers have migrated from urban areas and gone back to their home areas, according to Roy.

However, Kamal Mahmud, vice-president of Real Estate and Housing Association of Bangladesh, disagreed with the findings.

"Where have the prices declined? We did not see any declining trend in the market in recent months when the dollar prices have become costlier," said Mahmud.

"The price of cement, rods, and tiles is still high. You can say the prices have not increased. It remained at a standstill due to lower demand. But it has not declined."

The declining demand is a result of real estate companies being cautious about taking up new projects due to concerns about getting returns.

"Political unrest has also contributed to this," added Mahmud, also chairman of ISO Holdings Limited.

Mahmud said that if full-fledged construction work restarted, raw material prices may again increase by 15 percent to 25 percent.