08 October 2009
DOHA: Construction costs have come down almost 25 to 40 percent since early last year when the industry was booming.
Reliable sources in the building industry say the cost of construction being quoted in tenders has now slid to around QR4,000 per square meters for high quality construction.
The rates until late last year before the onset of the global recession hit the real estate sector were between QR5,000 and QR6,000 per square meters for high-quality building projects.
The rates apply to both government and private projects. As for projects that do not focus so much on quality, the rates could be much lower, say sources.
"AS we know, there has been a slowdown in the industry as compared to last year and it is clearly reflected in the rates contractors have now been quoting in bids for private as well as state projects," said a source in the building industry.
At least 60 percent of a project's costs go towards buying building materials, while the remaining 40 percent is spent on hiring labour, among other things. It also includes the contractor's margins.
The sector has now begun showing some recovery. The demolitions being carried out in some areas of Doha (a reference to Al Musherib area) might refuel construction boom as they would eventually pave the way for new constructions to begin, sources said.
"This (demolitions) is a way to bring buoyancy back to the building industry as new projects are launched on razed sites," said a source.
Asked how the increased steel prices were going to affect the construction sector, he said the hike had not actually made much difference since the demand for basic building materials such as cement and steel remain much subdued as compared to last year during the peak of the boom.
"Since not many new projects are being launched now, the increased rates of steel, or even cement for that matter, do not mean much as the demand remains lower," said another source.
According to him, people in the industry are, however, surprised by the steel price hike because of the demand being low. "I think the move has to do with the global trend. Steel prices have lately being going up in the international market, having plummeted late last year," said the source.
But locally, the prices of steel might have been raised because of the removal of government subsidy.
The development (removal of subsidy) is a welcome sign because it at least signals that the local construction industry is limping back to normalcy with the worst phase being over.
By Mohammed Saeed
© The Peninsula 2009