Construction materials factories proliferate

KATHMANDU, MAY 6--When it comes to development of any physical infrastructure, construction materials are the major components. In the last one decade, around 150 construction material factories from cement, paint and bricks to steel factories have been established with an eye on the realty sector and the government’s infrastructure development projects.

Industrialists and building material dealers said that it was the demand from the realty sector that has kept them in business as government orders have been on a decline. Due to lack of a timely budget, the government’s spending in the infrastructure sector moved at a snail's pace which has left a negative impact on the construction materials business, according to traders.

The housing sector that had been going through hard times for the past four years has started showing encouraging growth in the last six months. Developers said that Nepal Rastra Bank’s directive to permit loans of up to Rs 10 million under the home loan category had played a major role in the sector's gradual recovery. For the housing sector which took a big shape in the last one decade, dozens of cement, steel and paint factories have been established in the country thus helping to replace imports.


The country has also become self-sufficient in bricks, steel and paint, and cement production is also on an encouraging trend. Construction materials dealers said that if demand from housing developers and the general public had also slowed down, many steel, cement, brick and paint industries would have closed by now. “Demand went down by around 50 percent due to the government's failure to release the budget on time,” said Krishna Rijal, president of the Kathmandu Construction Materials’ Dealers Association.

Meanwhile, the Central Bureau of Statistics (CBS) has projected a growth rate of 1.57 percent for the construction sector in the current fiscal year. Bureau officials attributed the low growth rate to the impact of the failure to issue the budget on time. “The projection for the current fiscal year is based on housing construction and other normal construction works,” said Suman Raj Aryal, deputy director general of the bureau.

According to government records, developers received permission to build 65 housing projects with a total capacity of 6,330 units in the last eight years. With the situation in the housing sector showing indications of improvement, developers have been speeding up work at their projects. A massive growth in the import of heavy equipment also shows that infrastructure development in the country is growing.

In the first nine months of the current fiscal year, registrations of new excavators, dozers, rollers, tippers and trucks increased by 166 percent to 2,454 units. In the same period last year, the country had witnessed registrations of 956 such machines. Officials of the Department of Transport Management said that the government's road expansion drive and increased activity in the housing sector led to a rise in the import of construction equipment.

Meanwhile, construction materials dealers said that with demand for construction materials slowly picking up, prices too have increased 5-10 percent. Shil Ratna Tamrakar, proprietor of Shristina Traders which deals in paints, said demand had increased remarkably compared to last year and that prices had risen by up to 8 percent depending on the brand.

It is estimated that around 90 percent of the country's requirement of paints is fulfilled by domestic products. Along with a growth in housing activities in the past one decade, the number of paint factories too has gone up. There are 32 paint factories in the country with a combined investment of around Rs 6.5 billion.

Most of the production of construction materials is being consumed by the realty sector, according to industrialists. The Nepal Rolling Mills’ Association said that local factories had been able to exist mainly due to the demand from housing developers. There are around three dozen steel plants in the country, and of them, 12 are run in full-fledged operation. The factories produce 400,000 tonnes of iron rods annually.

Similarly, there are 70 cement factories that have obtained operating permits from the Department of Industry. The industry has an investment of around Rs 30 billion. Pashupati Murarka, vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said that even though the number of companies receiving government permits has gone up, only around 40 plants were in regular operation.

The country's annual requirement of cement amounts to 3 million tonnes, of which 60 percent is being addressed by local products. “There are no authentic records, however, most of the production is going for construction of private houses and commercial buildings of housing developers,” said Murarka. He added that if construction of physical infrastructure receives a boost and two under-construction cement plants come into operation, the country would be self-reliant in cement too.

According to the statistics of the Central Bureau of Statistics, 70 percent of the houses constructed in urban areas use bricks, cement, iron rods and paints. And people in the villages too have started building concrete homes. The bureau stated that 40 percent of the people in rural areas build houses using materials like bricks and cement. There are 1,053 registered brick factories in the country with 221 of them located in the Kathmandu valley. They produce 7 million bricks annually.