Amid surge pricing, cement demand cannot help but respond. Higher and fresh taxes introduced in the budget have sent prices in a tizzy. Prices have gone up roughly by Rs200 over the past few weeks, and are expected to increase further if cement manufacturers agree on the new royalty charge for their raw materials—for now, they are contesting it in court. At roughly 3m tons of cement sold during Jul-24, the fiscal year is off to a sombre start, in no hurry to put the demand deceleration to rest. Of this, exports were nearly 18 percent, higher than FY24’s 16 percent, up from FY23’s 10 percent. Surely, one month alone does not offer a vigorous enough opportunity for comparison but it is safe to assume that exports will have a growing contribution in the mix than before.

For one, firms have become more active in finding new markets to send their exports to, embarking beyond their border-sharing neighbors and other regional peers, onto shores far overseas. DGKC’s leap into exporting to the US and exploring opportunities with Mexico and European countries is promising. Other fundamental factors such as favorable currency, cheaper coal, improved economic conditions of traditional export-seeking markets (such as Sri Lanka, Afghanistan etc.) have contributed to the recent rush in demand. Only a few months ago in May-24, exports share was 22 percent of total sales.

Meanwhile, demand across Pakistani cities and towns remains sluggish at best because of higher cost of consumption goods, mounting construction costs, and incomes burdened by much steeper direct and indirect taxes. Homeowners looking to build homes have to contend with construction costs that rival and sometimes even exceed the value of the plots they own. Families looking to buy an “affordable” flat face more complex problems. For one, they have dwindling options. There is a mushrooming of unplanned and congested high-rise constructions in urban centers. In Karachi, many are devoid of water and gas supply, infect, a large number of new buildings are using gas cylinders as others fight over water tankers. Despite the unavailability of basic amenities, these apartments come at steep prices, though still considered affordable in “this kind of economy”. Affordable housing, a clear euphemism for “cheap” housing also happens to be one of the biggest scams that regularly eludes any law enforcement attention.

Builders cannot be trusted. Perhaps, they are paying the higher costs of construction, but they make money off of cost cuts with no damage to their bottom line. Charging for “extras” from consumers that have already booked and made installments, significantly cutting costs on materials, readily compromising on quality and hiring contractors offering the lowest rates regardless of the service and product offered, buying surrounding plots to construct even larger buildings in the vicinity; areas that were designated for ad-ons that attracted the buyers in the first place. These range from back-up power, advanced security, and RO plants, to running treks or reasonable walking spaces, parks, gardens, community centers, swimming pools, gyms, and so on. Many of these attractions never see the light of day. They would withhold leases of apartment occupants so they don’t retaliate whilst adequately lining pockets of the regulators that turn a blind eye wherever required. Unfortunately, all this is an open secret. The result is extremely densified swathes of land with multiple apartments that are built neck and neck with no communal spaces or room to breathe and folks stuck with poor quality homes that cost them an arm and a leg every year due to maintenance and repairs.

The fact is any major hike in cost of construction or an increase in tax trickles down to the price that the end user must pay. Wages are not rising at the same pace. One could argue that rising youth population results in growing household wages as more people enter the labor force; except perhaps for the significant level of youth unemployment in the country. Making a home in Pakistan continues to remain a distant dream.

While construction materials will continue to find market as several infrastructure, transport, and energy projects are under works, and as PSDP expenditure of the government is utilized, where they won’t find a burgeoning market is housing. Cement companies as invested they are in improving their efficiencies (captive power plants, waste heat recovery projects, alternative and green energy plans etc.) have a solid business model. Reaching to exporting markets when local demand ebbs, diversifying sources of materials to reduce dependence on one, and raising prices wherever they can, they are doing just alright. They can afford to keep their kilns running at low for now. And when government spending expands, they will benefit from increased demand then as well.