The construction industry in Nepal has faced significant challenges due to high and variable inflation, impacting long-term economic planning, investments, and industry boundaries. However, there have been few studies exploring the factors contributing to inflation within the construction sector, particularly in Nepal. This research has aimed to assess the impact of inflation on the prices of specific construction materials in Nepal. Using a descriptive research design and secondary data analysis, the study has examined inflation trends in construction projects over a significant period, from 2071 to 2079. The analysis has revealed consistent upward inflationary trends, particularly notable between 2017/18 and 2018/19, impacting various expenditure categories such as food, beverages, housing-related goods, and transportation. These inflationary pressures have had significant implications for the construction industry in the Kathmandu Valley, affecting operational costs, pricing dynamics of construction materials, and overall project expenditures. The study has investigated estimated contract rates for construction materials in the Kathmandu Valley, highlighting trends in pricing across fiscal years. Materials like cement and re-bar have exhibited considerable rate hikes, indicative of inflationary effects, while others such as sand, aggregate, and stone have displayed price fluctuations influenced by market dynamics. Especially, inferential analysis has validated significant differences in rates for materials like cement and re-bar between estimated contract and project levels, indicating a direct correlation with inflation. The analysis of the five experts within the construction industry in the Kathmandu Valley has revealed a complex interaction of factors such as global market trends, infrastructural deficiencies, government policies, labor costs, and government-led infrastructure projects. While there has been consensus on the significant impact of raw material costs and government policies, perspectives have diverged on the primary drivers of inflation. On the other hand, all experts have agreed on the necessity of stabilizing construction material prices to lessen inflationary pressures. The study recommends proactive engagement of construction firms with governmental bodies to advocate for policies addressing inflationary pressures. Collaboration between construction firms and government agencies is crucial to promote infrastructure development projects stimulating economic growth.

Keywords

Construction industry, Inflation trends, Construction materials

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