SANTO DOMINGO – “The situation for construction companies is a very difficult challenge right now. All materials have gone up and continue to rise, and clients neither want nor can accept price increases,” says engineer Rafael Durán, speaking about the collapse the construction sector has been experiencing in recent months, whose statistics, according to a Central Bank report, place it in the red.
The Preliminary Economic Report for the period January-March 2023, from the Central Bank of the Dominican Republic (BCRD), indicates that construction was the first economic activity that showed the greatest decline during the period January-March 2023, with negative results of 3.5%.
Fermín Acosta, former president of the Association of Housing Builders and Developers (ACOPROVI), states that the interest rate component and the continuous increase in construction material costs demand immediate measures from monetary authorities, who must find a quick solution to the situation
Durán, from SDBS Investments, explains that clients do not accept increases because even if the contract stipulates it, they are reluctant to accept increases, and many do not do so "because they then do not qualify for the loan.".
Acosta, for his part, believes that the construction sector "has not yet recovered from the drop suffered when compared to 2022.".
“When we have commitments to banks, we can’t afford to lose a client because then we have to sell again to pay the bank back. If we’ve already sold and we’re about to start construction and it’s not profitable at the old prices, the bank won’t lend to us, and many clients who accept a slight increase won’t sign until the construction is finished,” explains engineer Durán.
Both construction industry stakeholders agree that building material prices remain skyrocketing. Acosta states that, in addition to some costs continuing to rise, those that have decreased are nowhere near pre-pandemic levels.
Durán cites the example of concrete, which he budgeted at 6,300 pesos for the start of a project and is currently buying at 7,300. "Just one product," he emphasizes.
He adds that the workforce is not of sufficient quality. "Land is getting more and more expensive. In short, we're earning less and less," he emphasizes.
“Building to rent is an option for those with sufficient capital, because they recover their investment by selling the rental income on stock exchanges. It really is a challenge,” concludes Rafael Durán.
Fermín Acosta asserts that monetary authorities have slowed down the economy "and since construction is one of its main drivers, to stop the economy, construction must be stopped or reduced.".
The former president of ACOPROVI concludes by saying that "The 3.5% drop in construction activity in the first quarter of this year is not accidental.".
