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Effects of diesel price hike on the real-estate sector

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Effects of diesel price hike on the real-estate sector

Nigerians on Tuesday, March 8, 2022 woke up to the news on increased price of diesel as filling stations pegged the price above ₦600 per litre amidst the biting economic hardship.

Before now, this commodity was sold for a price between ₦200 and ₦408. As we know, diesel is the workhorse of construction sector, powering more than three-fourths of all heavy construction equipments.

Because of diesel’s unmatched and unique combination of power, performance, reliability, fuel efficiency and low emissions, it is the technology of choice and the workhorse of the nation’s construction sector, powering more than threefourths of all heavy construction equipment.

The high and increasing cost of diesel is compounding an already difficult situation for many real estate investors in terms of higher transportation cost of building materials, cost of production as well as significant increase in service charge imposed by facility managers on occupants of multi-family apartments and coworking spaces, so as to cushion the financial implication of the unanticipated hike in diesel price or cover the deficit incurred during the preceding year.

Also, the effect on the duration and budget of current housing projects cannot be left out. This is because, supposing one has an ongoing building construction project that is expected to cost N100 million from start to completion having done the budgeting and given the bill of quantities including the professional fees, and approached the bank for credit facility after making the 30% or 40% equity contribution.

The steady daily increase in diesel will negatively affect the credit facility thereby causing delays as one will need to return to the bank for upward review of the credit facility to enable one meet up with the project construction and the timing.

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