Should the contract of house construction of your house be done with the contractor on Material plus labor or should only labor contract be awarded to the contactor. In this video of Ghar Plans PK, we will tell you how to save money in house construction and real estate buying. Also we will guide you how you can save yourself from frauds in Real Estate and Construction Industry.
We will split this video in three parts:
Firstly, we will tell you about Grey Structure that should you do that contract on Material and Labor or should you only give contract on Labor.
Secondly, we will tell you about Finishing contract that how you should go about it
Thirdly, we will share a tip with you which will be highly beneficial for overseas Pakistanis which will help them in reducing the costs and getting good quality in construction material.
First of all we will discuss about grey structure. For grey structure my recommendation is that you should opt for with material contract and give this hassle to Contractor. Inflation in our country is very high. Contractors do try to incorporate this inflation but normally we have seen that inflation in construction industry has been very high in the past 2 years and the trend is expected to persist. On average there is 20% inflation every year. Just to give you an example, Steel Prices in Pakistan was Rs. 116 per kg in January 2021 whereas the Steel Price is Rs. 180 in September 2021. Due to COVID, there has been disruptions in supply line and that has triggered the rates of building material to go up.
I would like to share a business secret with you as well. Ghar Plans Pakistan is in construction business and we have made loses on all projects where we had Material plus labor contract whereas we have earned on labour only contracts.
Risk mitigation is a good strategy and by doing this you will mitigate your risk to some extent. On the other hand, be sure that the contractor is reliable and he doesn't reduce the quality of material or doesn't run away.
Some other reasons which i will like to share in order to tell you that with material contract is a better option for grey structure:
1. You don't get material on the same rates on which contractors do get material
2. Contractors do incorporate inflation but due to market competition they are not able to incorporate as much. Some of the contractors have tried to hedge themselves on inflation and price increases but still you will find fixed contract rates in most of the cases.
3. Material buying is as big a hassle in Pakistan as Labor Management is so you get rid of it as well.
4. You don't have to worry about material pilferage and material stealing
5. You tend to save the costs of Chaukidar.
Now lets move on to finishing:
In case of finishing you have to visit the market yourself and select the items. For most of the items you have to visit the market and when you are visiting the market, you can like the product of any shop. Now it is not likely that contractor might be getting deal from that shop as it is not possible to get deals from all the shops. You can negotiate the prices with those shops and then you can tell it to the contractor. If the contactor can get it cheaper from the same shop, you can share the margins but if the contractor can't get any better discounts, you should procure it yourselves.
Secondly, if you do a contract at the start or at the beginning, most of the contractors will mention the prices of the materials and if the prices of the materials increases, all the costs will go to you as you will be now buying a cheaper product. I will just give an example over here. Lets say you have decided that you are going to buy a tile of Rs. 3,000 per meter, by the time you are searching for the right product, the price of the tile which was at Rs. 3,000 at the time of contract has gone to Rs. 3,500 you will have to choose from the tiles which were cheaper at that time.
TIP FOR OVERSEAS PAKISTANIS:
Whenever you plan to make a house, you do visit Pakistan regularly so do bring some things in your baggage and put them in house. If you can't bring all those things, you can ask your friends when they are coming to bring them to Pakistan and gradually you can store them over here. Some of the products which you will not find of very high quality in Pakistan and if you will find them in Pakistan, you will find them at a relatively very high prices and there wiull always be a doubt that those products are fake or not. Following is the list of those products:
Switches and Sockets
Door Locks and handles
Wall Lights
IKEA products for your kitchen
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