Nepal’s construction industry has staged a dramatic comeback, with a robust 9.1 percent growth reported in the second quarter of the ongoing fiscal year, a stark contrast to the disturbing negative 0.3 percent growth in the first quarter of FY 2024/25. The National Statistics Office (NSO) attributes this turnaround to “higher imports and production of construction materials locally, from mid-October to mid-January.” This resurgence is a breath of fresh air for an industry that has been grappling with economic slowdowns, soaring material costs, and a sluggish real estate market.
The sector’s recent struggles are well-documented. Over the past two fiscal years, 2022/23 and 2023/24, growth rates were a meager 1.10 percent and 2.07 percent, respectively. Experts point to low government capital expenditures and private investors’ reluctance to commit funds due to high interest rates and market uncertainty as the primary culprits behind this stagnation. The sudden spike in construction material prices further exacerbated the situation, bringing both public and private construction projects to a near standstill.
The recent growth, however, offers a glimmer of hope. To sustain this momentum, the government must ensure the timely completion of infrastructure projects by reducing administrative and budgetary delays and enhancing expenditures. A robust system of capital spending and timely payments to contractors will not only encourage the construction sector but also boost economic growth.
Policymakers must also focus on stabilizing the prices of building materials. This can be achieved through tax adjustments and other measures to enhance the supply chain, ensuring that price fluctuations do not derail projects. Creating an investor-friendly climate is equally crucial. The government should offer incentives such as tax relief and loan subsidies to attract more entrepreneurs to the sector. Easy access to finance, particularly for small and medium-sized builders, will bolster entrepreneurs’ confidence and drive further growth.
The construction industry’s recent boom is a major relief, but its sustainable viability hinges on effective implementation of necessary measures. A combination of significant government spending, investor-supportive policies, price monitoring and control, worker skill enhancement, and increased public-private collaborations is essential to keep the sector on an upward trajectory.
Nepal’s construction industry has long suffered from labor shortages and an over-reliance on unskilled manpower, adversely affecting productivity and quality. Vocational training and technical education for workers and technicians will lead to a more skilled workforce, making the industry more efficient and competitive. The utilization of modern construction techniques and green technology will also improve long-term resilience.
Public-private partnerships (PPPs) can play a pivotal role in funding large infrastructure projects, distributing risks, and ensuring effective implementation. More foreign direct investment (FDI) in the construction sector, facilitated by policy stability and open business methods, will further strengthen its foundation.
With encouragement from all stakeholders, Nepal can translate this recent recovery into long-term economic gains. The construction sector’s future is bright, but it requires a concerted effort from the government, private investors, and the workforce to ensure sustained growth and resilience.