The recent revelation of a significant decline in cement sales throughout Pakistan has raised concerns, especially for the real estate industry. Cement sales fell from 3,230,000 tons in July 2023 to 3,010,000 tons in July 2024, marking a 6.81% decrease. This drop has had a major impact on the construction and real estate sectors, and according to the All Pakistan Cement Manufacturers Association (APCMA), it signals more serious economic troubles.
Causes of Decline in Cement Sales
Understanding the decline in cement sales requires examining the various economic and industry-specific factors at play:
Economic Slowdown: Pakistan’s economy is slowing down, as seen by a decline in consumer expenditure, industry, and total economic growth. Due to the postponement or reduction of both governmental and private sector projects, there is a lower demand for building supplies, especially cement.
Increasing Taxes and Business Costs: The cement sector has been severely impacted by the government’s fiscal policies, which are intended to increase income. Demand has been further suppressed by higher production costs that have been passed on to consumers as a result of higher taxes on completed goods and raw materials.
Complicated Regulatory Environment: A complicated and frequently onerous regulatory environment has been brought about by the drive to document the economy and include more enterprises in the tax system. Due to their difficulty adhering to the requirements, smaller retailers—who are vital to the cement distribution network—are experiencing supply chain disruptions and lower sales.
Export Dynamics: Cement exports increased significantly by 21.65% in July 2024, despite a decline in local sales. This change implies that producers are turning to foreign markets to counteract difficulties at home. This tactic is not without risk, though, as it exposes the sector to challenges from the competition and volatility in the global market.
Impact on the Real Estate Industry
The decline in cement sales has profound implications for Pakistan’s real estate industry, which is heavily reliant on construction materials
Expenses of Construction: The entire cost of construction has gone up as a result of the increase in cement prices brought on by higher taxes and production costs. This has increased the cost of developing real estate, which has an impact on both developers and final users. Increased expenses will probably be transferred to purchasers, reducing the affordability of residences.
Projects That Are Delayed: Due to increased material costs and lower cash flows, developers are encountering delays in several real estate projects. This has a domino effect on the whole sector, resulting in longer delivery schedules and slower project completion rates.
Reduced Investment: Real estate is no longer a desirable investment due to the unstable economy and growing expenses. Reduced capital inflows into the sector are the result of cautious behavior on the part of both domestic and foreign investors.
Effect on Employment: In Pakistan, the construction sector contributes significantly to employment. The country’s economic problems have been made worse by the slowdown in real estate development brought on by lower cement sales and increased expenses, which has resulted in job losses and fewer employment prospects.
Housing scarcity: There is now a severe housing scarcity in Pakistan. This problem will probably get worse as a result of the drop in real estate development brought on by increased building prices and a shortage of cement, which will make it more difficult for the typical person to afford a house.
Current Cement Prices in Major Cities
As of August 2024, cement costs in Pakistan’s major cities vary by brand and region. Here’s a snapshot of the current rates:
Karachi: Prices for 50 kg bags of Lucky Cement and Bestway Cement range from PKR 1,250 to PKR 1,265.
Lahore: Prices are slightly higher, ranging between PKR 1,270 and PKR 1,280 per 50 kg bag for companies like as Maple Leaf Cement.
Islamabad: Similar to Lahore, pricing for brands such as DG Cement and Fauji Cement range between PKR 1,250 and PKR 1,270 per 50 kg bag.
The drop in cement sales in Pakistan is a reflection of larger economic problems and industry-specific concerns. While the government’s efforts to boost revenue through increased taxes and improved economic documentation are admirable, these measures must be balanced against the reality of the cement and construction industries. Addressing these issues is critical to guaranteeing the real estate sector’s sustained growth and stability, as it plays an important part in the country’s economy.
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