Basic economics is at play when it comes to the burgeoning real estate prices in Karachi, people associated with the construction industry say. The cost of inputs — mainly cement and steel bars, which contribute at least 45-50pc to the total cost of construction of an average house or apartment — have risen quite a lot particularly over the past two years.

A cement bag now costs Rs530-545 per 50 kg, against Rs400 just two years back. Similarly, the price of steel bars of various qualities has also jumped .

Over the past two years, a builder said, the cost of constructing a house has gone up to Rs2,500-3,500 per square feet in posh areas, from Rs1,800-2,500. The rate for those equipped with imported wood, tiles and flooring materials is around Rs4,000-5,000 per square feet, up from Rs2,500-3,500.

In middle-income areas, the cost ranges between Rs1,500-1700 per square feet, against Rs1,100-1,200. Good-quality construction increases the cost to Rs2,200 per square feet, from Rs1,500.

The construction cost of ground-plus-four and five-storey apartments revolves around Rs1,800-2,500 per square feet, against Rs1,200-1,700 two years back. Using good construction materials push up the cost to over Rs3,000, from Rs2,000.

Similarly, the expense for ground-plus-10-storey building comes to Rs2,000-2,500 per square feet, up from Rs1,500-2,000.

The corresponding labour charges have also gone up. The builder said labour charges for apartments range between Rs600-700 per square feet, against Rs500 two years back. He believed that the share of steel bars (sariya) in a four-storey building comes to 15pc of the total project cost, and to 30pc in case of high-rise buildings (12 storey and higher). The share of cement in high-rise projects’ costs is 15-20pc.

However, the price being charged by builders for apartments is definitely beyond the reach of many people. For example, in areas like North Karachi, a 1,000-square feet flat costs at least Rs3-4m, while the same flat in an area like Khalid Bin Waleed Road is available at Rs8m. In locales like Cliftonne, its price crosses over Rs10m.

Similarly, a 3,000-square feet flat in posh areas sells between Rs30-35m, and goes for Rs22-25m in areas like Tariq Road. A good quality, main road-facing flat now usually carries a minimum price of Rs7-9m in middle income areas like North Nazimabad, F.B. Area etc.

Prices of apartments and bungalows vary from area-to-area, driven by rising land and material prices. Besides, apartment prices also depend on the reputation of the builder and the use of quality construction materials.

Irshad Mowjee, Director of Razaque Steels Pvt Ltd, said the price of high quality billet bars is around Rs83,000 per tonne, against Rs76,000 in January 2013, a jump of 10pc. The price increase is attributed to higher electricity charges and sales tax on steel bars and billets.

Steel bars made from ship plates are now selling for Rs75,000 per tonne, against Rs70,000 per tonne two years back. Their prices have risen because the ship prices have gone up.

When asked about the share of steel bars in the total construction of a house or apartment, Irshad said the rule of thumb is that steel comprises 30pc of the project cost. For a house, this may increase slightly.

A contractor, Mohammad Rehan in Gulistan-e-Jauhar, said in his area, the going construction rate is Rs1,500 per square feet, up from Rs1,100-1,200 two years back. If a person covers 1,600-1,700 square feet in a 240-yard plot of land (ground floor), then it will cost at least Rs2.4m-2.5m.

The cost of construction rises by Rs400,000-500,000 when a buyer uses high quality wood, marble and tiles, he said. Consumers have to pay handsome money to get their house layout officially approved by the relevant authority.

Covering 3,000 square feet in a 400-yard plot will cost at least Rs4.5m (ground floor), and Rs3.5m for the first floor. The cost of construction, including getting utility connections, crosses Rs10m if high quality imported marble, tiles and wood work are used.

A sanitary store owner in F.B. Area said per item prices of locally made commode toilet and WC (flush toilet) have risen by Rs700-800 and Rs200-300 respectively over the last two years.

Similarly, the price of locally produced tiles has gone up by Rs100-125 per square metre. He said there is a huge price difference in imported sanitary items and tiles and local products, depending on the rupee-dollar parity.

A builder said if cement, steel bars and sanitary fittings were priced fairly, it can drastically cut down the price of any housing project.

Meanwhile, many new home buyers who do not want to first purchase a costly plot and then go through the hassle of engaging contractors and architects etc, directly buy a new house at market price, knowing that the property will definitely pay off in the immediate future. However, very old houses with outdated designs sell at the price of a plot.

Published in Dawn, Economic & Business, October 20th, 2014