Building contractors get hammered

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The price of construction steel rose three times within the last two months and it currently fetches VND18-19 million ($869.5-$917.8) per tonne, nearly VND1 million ($48.3)/tonne more than in early 2011.

According to the Ministry of Industry and Trade (MoIT), the price of construction steel offered by Vietnam Steel Corporation members (not including value added tax-VAT) fluctuated between VND16.4-VND16.65 million/tonne in the north and VND16.37-VND17.14 million/tonne in the south. The wholesale price will range between VND18-VND18.8 million per tonne if VAT is included.

The retail price of cement also hiked VND10-20,000/tonne and currently fetches between VND1.1-VND1.39 million/tonne in the north and VND1.44-VND1.48 million/tonne in the south.

Similarly, a number of other building materials such as tiles and bricks, sand, paint and interior furbishing equipment saw their prices augmenting between 10 and 30 per cent. The cost of labour also put on 20-25 per cent. This has driven construction costs far beyond initial estimations.

Deputy chairman of Vietnam Association of Construction Contractors Vu Gia Quynh said escalating input costs have badly affected construction works.

He noted that small and medium-sized contractors would suffer the most since big contractors are often insured with contract terms saying that the contract value may latter be revised based on actual market situation.  

Director of Gia Bao Construction Company Limited Nguyen Khac Dao once signed four contracts on building housings in late 2010 on a turn-key basis.

“Compared to the time these contracts were inked, the price of construction steel hiked over VND1 million/tonne, of bricks up 20 per cent and of interior furbishing equipment up 15-30 per cent, while the labour cost went up from VND100,000 to VND150,000 per day,” Dao said.

He said he was now on the horns of a dilemma as the tenants refused to raise the contraction value.

Rising costs also baldy affected housing projects for low-income people.

Deputy director Nguyen Van Da at Vinaconex Xuan Mai Concrete and Construction Joint Stock Company, a firm piloting building houses for low-income people, said the firm recalculated the construction costs amid soaring input costs and would unveil final pricing terms not sooner than April, 2011.

He said the housing price would possibly not exceed VND14 million ($676.3) per square metre.  

General director of Vincon Property and Financial Investment Joint Stock Company Tran Duc Long said the firm may add 20 per cent to the cost of  housing projects to be launched within 2011.