Construction and investment activities set to advance this year.

Byline: KHALIL AHMED

Interview with Mr. Ahmed Owais Thanvi - Managing Director, King's Group (Builders and Developers)

PAGE: What kind of challenges could builders encounter in 2023?

Ahmed Owais Thanvi: The COVID-19 pandemic (and its related labor issues, supply chain challenges and rising interest rates) has recently tested the construction industry. It will continue to do so in 2023. However, companies that are nimble, tech-savvy and strategically focused should be able to weather obstacles, differentiate from competitors and prosper. Following positive trends in nonresidential construction over the past few years, recession risk looms due to high and rising interest rates which drive cost increases and a decline in spending. These pressures may turn 2023 into a year of caution for project owners concerned about their ability to obtain necessary financing. These issues and the ongoing labor and supply chain challenges add a layer of complexity that will impact activity volume in 2023. As a result, construction activity may decline, especially in industries like retail and office. However, even with the current economic challenges and construction, there are bright spots in the year ahead, including warehousing, distribution, healthcare and public infrastructure.

PAGE: What is your standpoint on cement and steel prices in 2023?

Ahmed Owais Thanvi: The big question on construction leaders' minds is what's in store for 2023. Inflation has plagued the industry and COVID-19 have continued to impact supply chains, causing materials prices to swing wildly. While lumber and plywood prices were a huge concern at the beginning of the year, that has since eased and cement and diesel costs are now giving contractors grief. That volatility makes it difficult for contractors to plan projects, and it has not been uniform across construction materials. Price hikes and shortages ease for some products, and to remain volatile for others. As the overall jobs market shows signs of weakening, the industry may be able to benefit from more people seeking work. Still, upcoming federal spending promises to keep demand for construction workers high.

PAGE: How would you comment on bank financing in the housing sector in 2023?

Ahmed Owais Thanvi: Rates are unlikely to return to pre-pandemic levels even as inflation cools. Instead, over the course of 2023, experts predict mortgage rates to fall in line with historical norms - between 3% and 7%. They're already on the...