Building material prices up 20pc on shilling free plunge
Architectural Association of Kenya (AAK) President Florence Nyole addresses journalists at the launch of the Status of the Built Environment Report 2023 at Radisson Blu Hotel, Nairobi on December 6, 2023. PHOTO | LUCY WANJIRU | NMG
The free fall of the Kenya shilling has seen the construction cost soar in the past 12 months, lifting the expense per square metre by more than 20 percent.
The latest State of the Built Environment report from the Architectural Association of Kenya shows the cost of building a square metre rose from a lower range of Sh34,650 to Sh77,500 at the start of the year to between Sh41,600 and Sh100,800 this month.
The high price of imported building materials and equipment has increased costs.
“The construction industry in Kenya has witnessed a notable surge in material costs over the past year, significantly impacting project budgets and timelines. Various economic factors, including currency devaluation and increased import costs, have contributed to this escalation,” the report read in part.
The price of building commodities, including steel, iron, cement and fuel, rose in the 12 months to December 2023, straining further developers’ pockets. Steel prices per kilogramme rose from Sh140.6 last December to Sh146.26 this month, burdening the construction of new units and infrastructure.
The cost of cement per bag increased from Sh650 to Sh750.
The report further highlights the price of fuel added to logistics and operational expenses in the sector.
“The increased costs of imported materials, exemplified by steel and cement, compounded by escalated fuel prices, have elevated construction expenses.
“As a consequence, construction projects face budgetary constraints and potential delays, posing challenges to the sector’s growth and development,” added the report.
The rapid depreciation of the Kenya shilling against the US dollar has played a pivotal role in the cost of construction inputs.
Kenya imports most of its construction materials, such as steel, cement clinker, fuel, machinery, and equipment, with the weakening shilling making the cost of these imports shoot up.
Kenya doubled Value Added Tax (VAT) on fuel to 16 percent from July 1 this year, which coupled with the free-falling local currency, continued rally in global prices of refined fuel, and scrapping of stabilisation scheme have combined to send pump prices to record highs.
