Escalating prices of cement could wipe away gains being made in the construction and estate industry.
While the price of new homes has been on a downward trend following the reduction of Value Added Tax by the Ministry of Finance in this year’s Budget, developers could find it increasingly difficult passing on this benefit to buyers due to a sustained increase in input prices.
The instability in the price of cement, a key ingredient in construction, has been blamed on growing demand, both within the country and neighboring markets.
This is especially so in Southern Sudan, where a construction boom is currently underway.
"This will of course affect the cost of the housing estates we are constructing in future because we are buying material expensively," said Mr. Joseph Kitamirike Chief Executive Officer National Housing Corporation.
He was speaking to chief executive officers drawn across Africa at the annual Africa Management Forum in Kampala recently.
Mr Kitamirike said Uganda estate developers are currently paying a "peace premium" as Southern Sudan construction boom has taxed the region’s capacity to meet the demand with the cost of cement up by more that 25 per cent.
He said this also applies to the cost of steel. This has been going up for past 4 years, but most especially in past 2 years by about 50 percent, a situation that has forced developers to buy steel from abroad.
Consequently he said estate developers might consider the possibility of importing cement from locations outside Common Market for East and South Africa (Comesa) at a cheaper cost.
In a space of only five months, the price of cement has increased by from Shs15,000 to Shs25,000 in almost all retail outlets in Kampala.
However, the Commercial Manager at Hima Cement Ltd, Mr. Ken Lubega, said there is also growing demand from Rwanda, Burundi and DR Congo.