The construction cost index in Bangladesh hit 6.01 percent in May, making it costlier to implement both public and private construction projects, according to the Bangladesh Bureau of Statistics (BBS).

As per the Building Materials Price Index (BMPI), overall construction costs saw month-on-month growth of 0.06 percentage points from 5.95 percent in April this year.

After falling in March and April, the BMPI climbed back to its highest level since February, when it stood at 6.02 percent, data from the state-run statistical agency shows.

The BBS released its updated BMPI after compiling the cost of three key components: building materials, transport and labour charges.

The cost of transportation registered month-on-month growth of 0.26 percentage points to reach 5.83 percent in May.

Similarly, the growth in labour costs stood at 6.18 percent, up by 0.05 percentage points from April.

The price of building materials also increased, rising by 0.06 percentage points to reach 5.96 percent in May, BBS data shows.

"The higher price of building materials has slowed overall construction work," said Bimal Chandra Roy, president of the Bangladesh Association of Construction Industry (BACI).

Most contractors are under pressure as they had signed contracts years earlier, when construction costs were lower. Prices have gone up since, but their funding has not risen at the same pace.

"There is a big gap between the actual price and contract price," Roy added.

The devaluation of the taka against the US greenback is one of the major reasons for the increase in construction costs, he explained.

In May 2023, each US dollar fetched around Tk 108. But that figure climbed by 9 percent to Tk 117 per dollar in May this year, according to Bangladesh Bank.

Amid inflationary pressures, labour and transportation costs have also risen, he said.

To arrange labourers for construction work, we have to spend more to ensure food and accommodation, Roy added.

The recently passed budget for fiscal year 2024-25 has only intensified the pressure on contractors, he lamented.

For example, local importers have to pay higher duties to import excavators from this fiscal year.

Roy, also managing director of Next Spaces Limited, also pointed out some barriers for domestic contractors, saying: "A foreign company can easily import an excavator with zero duty."

So, in terms of competitiveness, it is very difficult for domestic firms to match some foreign firms based in India and China, he said.

Md Emdadul Haque, director of the Real Estate and Housing Association of Bangladesh, said the BBS's estimates on building materials were mostly reflected by the market.

"We require around a hundred types of building materials from the backward linkage industries. Most of the spare parts for equipment have risen by around 20-30 percent recently," he said.

"We always remain in fear of which material's price will rise. When the price of any raw material goes up swiftly, it does not drop that way," added Haque, also managing director at Haque Home & Builders Limited.

"For example, if the price of a tonne of rods increases by Tk 10,000 at once, it reduces phase by phase by around Tk 2,000 or Tk 3,000," he said.