KARACHI, June 18: Construction cost would witness an increase of 20 to 25 per cent in the wake of increase in the prices of building material.

The prices have increased after an increase of one per cent in the GST and other taxes in the budget.

Nusrat Mirza Chughtai, Acting Chairman, Association of Builders and Developers (Abad), told Dawn that besides increase in building material prices, the government also plans to levy a tax of Rs25 per square foot on construction and Rs50 per sq yard on developed plots.

He added that the proposed imposition of income tax is prima facie a bad law as it has been imposed on area and not on income.

He said that the price of a 50kg cement bag has already increased by Rs30-35 after an initial jump of Rs3,000 per ton on steel bar prices.

Nusrat claimed that tiles and sanitary makers have raised prices by 6 to 8pc followed by at least 9pc hike in wood rate.

He said that the government had increased the sales tax by 2pc on non-registered persons besides making changes in other taxes, but building material manufacturers have come out with 9 to 13pc price jump as per their own estimates.

He urged the government to check whether the price hike was justified or artificial.

He added that hike in building material cost has put builders in a difficult fix as many projects are already running and builders cannot claim price escalation from buyers.

The Abad acting chairman said that Pakistan had a backlog of over nine million housing units and builders are adding another half a million houses to the backlog every year. About 40pc people live in urban areas and 58pc of them live in slums.

On a 1,000 square yard project, the construction cost is approximately 100,000 square feet. Steel component accounts for 30 to 40pc which is about 1,000 metric tonne which puts on an additional burden of 20-25pc in the construction cost.

The cement component consists of 20pc which is approximately 200,000 bags. The additional cost will increase the construction cost by 10-15pc.

Nusrat said that ABAD, being the main stake holder in the construction sector, was not invited to give its proposals.

He said that the association had sought time from the Finance Minister for a meeting so that builders can elaborate the issues faced by them.

He said that builders proposals would help save the common man and the construction industry.