Construction demand up

The construction industry has certainly been in a whirlwind. First came the Naya Pakistan Housing Plan (NPHP) with the promise of 5 million houses. Then came the construction package meant to stimulate demand in real estate and housing development. Now comes the Diamer Basha Dam. A project that will create substantial demand for construction materials. If prices have been raised, there is good reason for optimism (read more: “Of stranger things”, May 15, 2020).

Sources within the industry say that cement plants are operating and demand will start recovering by July. Given the relaxation of lockdown, this could very well be true. Whereas there is no way the NPHP can reach its annual target of a million houses this year or even next year for that matter, incremental development will pick up.

Delayed projects are expected to be expedited through the government one-window approval platform—approvals used to take anywhere between 12 and 16 months to get the construction of apartment buildings moving and will now be brought down to 30 days. Meanwhile, some government housing projects (particularly five projects under Federal Government Employees Housing Authority- FGEHA) will piggyback off the NPHP platform and may materialize faster.

Rs 442 billion contract for the construction of the Dam has already been awarded to a joint venture Power China-FWO. The total financial outlay of the project is Rs1,406.5 billion would be completed by 2028. Estimates made by Arif Habib Ltd. suggest the project would generate cement demand of 50 million tons over a period of ten years.

Both the housing and the dam projects are encouraging from the demand perspective which was a growing concern as construction had really slowed down over the past year or so amidst economic instability. The cement industry has been expanding capacity since 2016 after CPEC was penned hoping demand would catapult from there. Though it remained lower than projected targets, new mega projects if they reach their potential will certainly make up for demand gaps.