Mass Builders Warn of ۲۰-۳۰% Annual Losses for Traditional Developers

According to a report by SAMA, Reza Bidar, a mass builder in the construction industry, has issued a warning about the persistence of traditional methods in managing construction projects, citing fundamental changes in the sector’s economy. He emphasized that current conditions are entirely different from those of previous years.

Citing available statistics, he stated: “Over the past ten years, the general inflation rate was consistently higher than the inflation of building materials. However, in the last three years, this trend has reversed, with material inflation averaging around 67 percent, surpassing general inflation, which averaged 40 percent.” Bidar described this discrepancy as translating into annual losses of 20 to 30 percent for developers, explaining that any delay in purchasing materials significantly increases the final cost of a project each year.

Strategic Shift in Material Procurement and Financing

Emphasizing the need for a change in approach, this mass builder said: “In the past, it was advised that financing at high interest rates was not cost-effective. But today, even with a 20 percent interest rate and considering current inflation, timely financing is cost-effective, and any developer who does this will ultimately be the winner.” He also warned about the effects of rising energy carrier prices on transportation costs and the final price of housing, recalling the experience of gasoline prices increasing from 1,000 to 3,000 tomans, which multiplied costs several times over.

The 42 Million Singles Opportunity; A Threat to Traditional Developers

Referring to statistics on the country’s single population, reported to be around 42 million people, Bidar called this both an opportunity and a threat, saying: “This population represents a new market for housing, but developers must plan for the needs of single-person households; otherwise, this opportunity will turn into a threat for them.”

In response to a question about whether previous construction models are still effective under current conditions, he clarified: “Some developers who operate with a past mindset are facing sales problems, while those who have adapted to the new conditions not only have no sales issues but are even selling their products at higher prices.”

In conclusion, Reza Bidar stressed that the construction industry is in complete stagnation for a group of developers who continue to follow traditional methods and previous beliefs, and if they do not change their approach, one should expect a massive exit of this group from the market.