Iraqis, on Cusp of Building Boom, Repair Homes

July 18, 2010 by  


By Khalid al-Ansary

BAGHDAD, July 14 (Reuters) – Scaffolding is creeping up the walls of bullet-scarred villas across rubble-strewn Baghdad, and gangs of labourers are piling up bricks as growing security allows a mini-construction boom to take hold in Iraq.

It may be the leading edge of a building surge as work now limited to a few hundred villas makes way for mega-projects when Iraq starts to restore its infrastructure and housing stock, left in tatters by decades of war, sanctions and neglect.

The Iraqi authorities want to build on a massive scale — 1 million new housing units in three years. In a single project, plans call for 75,000 units in Baghdad’s Sadr City slum. Gulf companies are bidding for many of the projects.

“The local production of construction materials will not be enough for such big projects,” said Abdul Rahman al-Mashhadani, an economist at al-Mustansiriya University, who believes a government estimate that Iraq needs more than 3 million housing units is too low.

Iraq’s infrastructure needs are daunting, more than seven years after the U.S.-led invasion that toppled Saddam Hussein. Roads, railways, the electricity grid, ports, housing and factories must be rebuilt.

The National Investment Commission has put together a wish list of 750 projects that alone require $600 billion.

That could be good news for early foreign investors such as French cement maker Lafarge <LAFP.PA>, which has braved continuing insurgent attacks and political uncertainty to invest in Iraq’s construction materials sector.

But it could be bad news for inflation, and for Iraqi consumers, as prices of bricks, cement and plaster, which have tumbled, are pushed higher by soaring demand.

For now, dramatic gains in the last three years after the sectarian slaughter that followed the 2003 ouster of Saddam have allowed Iraqis to renovate decrepit villas or start new ones. Rising government wages have fuelled the boom.

“It feels like a baby or a tree growing before your eyes …” said Kadhum Jawad, 37, an engineer, as he waited for a cement truck to arrive at a plot in Baghdad where he, his brother and his sister are building a new 150 square metre home.

Prices Have Tumbled

In the latter days of Saddam’s 1979 to 2003 rule, as the economy tanked under the weight of sanctions and the cost of war, only wealthy families and high-paid officials could afford to build new houses or renovate a home.

The materials market was controlled by a state-run company, and while prices were subsidised, they remained beyond the reach of most homeowners. Ordinary government workers earned the equivalent of around $2.50 a month.

But the price of bricks has tumbled from two years ago, when the cost of waste oil used by brick factories was sky-high and fighting between majority Shi’ites and once dominant Sunnis meant many plants remained shuttered.

Prices of cement, sand, plaster and reinforcing steel used to strengthen walls are also down as old factories reopen, new ones are set up and more importers enter the market.

Materials now flow in from abroad. Importing cement from Pakistan, reinforcing steel from Ukraine and wooden doors from southeast Asia helps keep prices low.
As a result teachers, police officers and other wage earners are tackling home renovations.

“It was a dream for me to sell to a teacher or a government employee. They couldn’t afford (these things). I used to sell them used bathroom sets and faucets,” said Abu Karrar, a shop owner who sells mostly Turkish and Iranian products.

“Iraqis didn’t know what a Jacuzzi or a shower cubicle was.”

A tonne of reinforcing steel that sold for $1,270 in 2008 now costs $720, a three-tonne truckload of sand that went for $508 now costs $381 and a tonne of cement has fallen from $200 to $150, said one local trader.

France’s Lafarge, the world’s largest cement maker, is one company that will benefit from the coming boom.

It already has cement plants in northern Iraq’s semi-autonomous and relatively stable Kurdish region and recently launched a $200-million renovation of an Iraqi cement plant near Kerbala in the south to boost production.

Imports will likely be needed nonetheless to meet demand.

“Our cement factories don’t cover a quarter of the market’s needs,” said Abu Baqir, a Baghdad supplier whose plot of land is lined with piles of bags of imported and local cement, sand, stones, and brick.

Iraqis building a home have an increasingly impressive array of choices, not only of basic materials but also of luxuries like decorative tiles, Jacuzzis and shower enclosures.

“Iraqis are dazzled by the different types of ceramics and tiles they have seen since the fall of the regime,” said Amer Ali, 47, a government worker building a home.

(Editing by Michael Christie and Tim Pearce)

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