Government Urged To Intervene, Control Construction Material Prices

January 25, 2021

Government Urged To Intervene, Control Construction Material Prices

With prices of construction materials on the rise, industry players have urged the government to “intervene” by controlling prices of such products and penalise suppliers who engage in unethical price manipulation.

Prices of steel, for instance, have increased by around 40% over the past six weeks up to RM3,000 per tonne, according to Guild of Bumiputra Contractors Bhd Chairman Md Nasir Ibrahim.

Prices of materials such as cement, bitumen and sand have also increased, he told Free Malaysia Today (FMT).

“My conclusion is that it’s a result of a cartel among suppliers, who are able to control the prices in order to cut losses from the lack of demand during the pandemic,” he said.

Effects Of COVID-19: What Are The Shifts In Property Prices?

With many contractors still suffering from revenue losses following the various lockdowns, the increase in prices placed additional pressure on them.

Master Builders Association of Malaysia (MBAM) concurs, adding that the price hikes are especially damaging to smaller stakeholders as they may not have anticipated the cost of complying to COVID-19 standard operating procedures, such as operating with limited workforce and testing for workers.

“The government should implement strict control over prices of construction materials to prevent cartels and monopolies taking advantage of these,” MBAM said as quoted by FMT.

The association also suggested including a price variation clause in all contracts to account for material cost fluctuations.

Real Estate and Housing Developers’ Association Malaysia (Rehda) Penang chairman Tan Hun Beng said a continuous increase in prices will not only affect contractors, but also other industry stakeholders such as property developers and buyers.

He said some developers were willing to negotiate if prices rise beyond a certain reasonable threshold, with the additional burden passed on to future buyers.

“A developer cannot adjust the price a property has been bought at after it has been sold…So if the contractor is affected by high cement and steel prices, and if they renegotiate their agreement with us, our margin on the sold units shrinks,” he explained as quoted by FMT.

“Since they can’t change the selling price, they have to make up for the difference by pushing up the price of unsold units.”

Nasir hoped the government would have the will to intervene. However, they are currently “focused on politics, so maybe this seems like a small thing to them”.

He pointed out that the government should ensure that prices remain reasonable because, if contractors can no longer afford to continue construction, projects will stall or be abandoned.

“The contractors lose, the government loses, and the people will suffer too,” he said.

 

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