THE IMPACT OF RISING COST OF BUILDING MATERIALS ON COMMERCIAL PROPERTY DEVELOPMENT IN NASARAWA

THE IMPACT OF RISING COST OF BUILDING MATERIALS ON COMMERCIAL PROPERTY DEVELOPMENT IN NASARAWA

ABSTRACT

Building materials contribute immensely to the quality and cost of housing, from what is used in the foundation to the materials for roofing and finishes, the trends in the cost of this building materials have become a concern as a result of the ever increasing cost of building which cumulate in a very high cost of overall construction project. This trends have necessitate the researcher to examine the impact of rising cost of building material on commercial property development in Nasarawa. The data for used for this research were sourced from the main contractors, builders’ merchants and consultants who are registered with government bodies through questionnaire survey. The research shows that the rising cost of building is majorly due to high rate of inflation, high exchange rate, over dependence on foreign building material etc. The study concluded that the rising cost of building material affects negatively on the development of commercial property in Nasarawa.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Building materials contribute immensely to the quality and cost of housing, from what is used in the foundation to the materials for roofing and finishes, while the building materials industry is an important contributor to the national economy of any nation as its output governs both the rate and the quality of construction work.

Building experts have lamented the rising cost of building materials especially cement stressing it remained the missing link to the delivery of affordable home to low income earners. This is more so as most of the conventional building materials are often imported and come with huge duties and other levies associated with importation, that make cost of such materials quite expensive.

Cement alone constitutes about 40 per cent of the building materials component and local consumption of cement in 2009 alone was about 19 million tonnes when only 9.6 million tonnes were produced locally.

Building materials contribute immensely to the quality and cost of housing, from what is used in the foundation to the materials for roofing and finishes, while the building materials industry is an important contributor to the national economy of any nation as its output governs both the rate and the quality of construction work.

Additionally, building materials constitute the largest single input in housing construction with about 60% of the total housing expenditure used for the purchase of building materials. On the other hand the cost of building materials constitute about 65 percent of the construction cost.

Invariably, building materials form the main factors that restrict the supply of housing. Having said that, it has been observed that one main barrier to the realization of effective housing in Nigeria as revealed in successive government efforts has been the cost of housing in the country.

The modern building industry lays much emphasis on sophisticated building materials and techniques that are expensive and energy consuming. Though, housing delivery efforts have evidently been inhibited by prohibitive costs of building materials, this problem cannot be reasonably and reliably overcome by merely resorting to the use of locally available materials without due considerations to the applicable initiative, the cost of processing and sustainability of the local materials.

Nigerians would continue to pay more for accommodation in major cities until the cost of building materials is subsidized. Many completed housing estates across the country have remained unoccupied because of the high rental and sale prices attached to them as against the meager income of the average Nigerian worker. More so, it is worse now due to the economic recession.

The cost of building materials poses a significant threat to both the construction industry and people aspiring to own houses; for example, a bag of cement, which was valued at Ν1,350.00 in 2006, went as high as Ν1,850.00 in 2009 depicting about 37% increment; it was Ν2,000.00 in 2015 during peak season (field survey 2015), then in 2016 the price fluctuated between N1,800 – 2,000. As at the first quarter of 2017 a bag of cement is being sold for N2750. This trends great impact negatively on the development of commercial properties.

1. 2 STATEMENT OF RESEARCH PROBLEM

The cost of building materials poses a significant threat to both the construction industry and people aspiring to own houses (Anosike, 2009; Mekson, 2008; Mohammed, 2008; Njoku, 2007); for example, a bag of cement, which is valued at Ν1,350.00 in 2006, goes as high as Ν2,750.00 in 2017. Supporting this view, Jagboro and Owoeye (2004) earlier established that increase in the prices of building materials has multiplier effects on housing development while Idoro and Jolaiya (2010) affirmed that many projects were not completed on time due to the cost of materials, which have been on the increase. Therefore this research is intended to examine the impact of rising cost of building material on commercial property development in Nasarawa.

1. 3 AIM AND OBJECTIVE OF THE STUDY 

The aim of this work is to examine the effect of rising cost of building materials on commercial property development in Nasarawa.

To achieve this aim, the following objectives shall be looked into:

1. To review literature on cost, property development and building materials.
2. To examine the trends of the prices of building materials. (Between 2011- 2017).
3. To examine how rising cost of building materials has affected commercial property rental value in the study area.
4. To proffer solution on solving the effect of rising cost of building materials by introducing the use of alternative building materials.

1.4       RESEARCH QUESTION

This research work tends to address some fundamental questions, which are as follows:

1. What is the trend of prices of building materials in Nasarawa Between 2011-2016?
2. What is the effect of rising cost of building materials on commercial property value in the study area?
3. What are the solutions to the effect of the rising cost of building materials on commercial property development?

1.5       SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. Findings from this study will educate the general public on the current market cost of building materials in Nigeria and its effect on commercial property development in Nigeria.
2. The results of this study will sensitize the policy makers and the government on the need to make and implement policies that will reduce the cost of building materials in Nigeria thereby encouraging massive housing development all over the country.
3. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.6       SCOPE AND LIMITATION

This research limited to the assessment of the impact of rising cost of building material on commercial property development in Nasarawa town.

Some obstacles encountered in the course of carrying out this research were as follow:

• Time factor was the major constrain couple with multiplicity of other classroom work and lecture requirement were a set back to the research.
• Un-cooperating attitude of some respondents as they were busy to attend to the researcher.
• In accessibility of adequate information from research respondent due to illiteracy among them, some find it difficult to understand some question they were asked.
• Finance was also a limiting factor in the course of the research.

1.7       DEFINITION OF OPERATIONAL TERMS

Commercial Properties: Immovable properties, land together with all the properties on it that cannot be move with any attached rights paten business operation (Microsoft Encarta 2009 Microsoft Corporation).

Cost: Oxford Advance Learner’s Dictionary (6th edition) define it as the amount of money that you need in order to buy, make or do something.

Building: a structure with a roof and walls such as a house, school, store, or factory.

Materials: a matter from which a thing is or can be made.

Building Materials: this is any material which is used for construction purposes.

Property: a thing or things belonging to someone; possessions collectively.

Development: this is a process of developing or being developed.

Property Development (The Collins English Dictionary, 2014): the business of buying land and buildings and then making improvements to them so that their selling price exceeds the price paid for them.  

1.8       HISTORICAL BACKGROUND OF THE STUDY

Nasarawa state was created on the 1^st October, 1996. By the Abacha government, Nasarawa State is bounded in the North by Kaduna State in the west by Abuja the Federal Capital territory in the South by Kogi State and Benue State and in the East by Taraba State and Plateau State.

A network of road exists within the state linking all rural areas and major town.

There are thirteen local government areas in the State which are Akwanga, Awe, Doma, Karu, Keana, Keffi, Kokona, Lafia, Nasarawa Eggon, Obi, Toto and Wamba.