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Adopting value engineering would circumvent building materials’ price hikes - Daily News Egypt

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Adopting value engineering would circumvent building materials’ price hikes

Applying value engineering in various projects can save between 7 to 10% of the total construction cost

The price spikes in construction materials in Egypt’s real estate market, high rates of inflation, and the interest rates have led real estate developers to increase their units’ prices amid expectations that prices will hike by more than 30% by the end of this year.

Accordingly, value engineering has become a necessity imposed by the high cost of construction as a result of the high prices of raw materials.

Real estate developers believe that the application of value engineering raises the value of various projects with significant improvement and a clear reduction in their cost, which helps improve the profitability of these projects.

Value engineering is a systematic, organised approach to providing necessary functions in a project at the lowest cost. Value engineering promotes the substitution of materials and methods with less expensive alternatives without sacrificing functionality. It is focused solely on the functions of various components and materials rather than their physical attributes.

Head of the ECB Expertise House Mohamed Abdel Ghany said that value engineering has become of paramount importance to everyone working in the field of construction and development, especially real estate developers and the state, given that the construction industry in Egypt is currently witnessing a boom in the volume of real estate investments.

Abdel Ghany highlighted the importance of applying value engineering, which directly contributes to reducing non-essential cost in a simplified manner while raising the quality of projects and increasing their life spans.

He elaborated that value engineering is organised group work with a scientific methodology carried out by a specialised team that aims to analyse the functions of each element of a project, its components, and costs, and then propose alternatives that ensure the achievement of those functions at the lowest total cost.

This approach is distinguished from others in that it is an effective method that relies on creative solutions to solve problems without compromising basic requirements and quality, he noted, explaining that value engineering is a starting point for raising the efficiency of project values ​​and reducing construction costs.

Abdel Ghany added that applying the principles of value engineering in various projects can save between 7 to 10% of the total construction cost, provided that a good project design is available, which save 30% in some designs. This confirms the necessity of value engineering, especially in light of current economic circumstances.

Besides the pressures facing real estate developers that force them to build projects at a lower cost, there are other major problems, including the high prices of lands, selling properties at competitive prices over long payment periods, and delivering on time with the required specifications — an equation that will become very difficult for any developer in the absence of the application of value engineering in their projects.

Head of the Real Estate Development Chamber at the Federation of Egyptian Industries Tarek Shoukry said that the application of principles and methods of value engineering in projects has become one of the drivers of success and continuity of real estate companies in light of the great financial changes that the real estate market is witnessing in the current period.

He also stressed the high value of the application of value engineering at this difficult time, especially since the construction industry in Egypt is facing an increase in the cost of projects with the pressure of the construction duration, which is considered a great challenge for all developers.

“As a result of the conviction of Egyptian consultancy offices that Egyptian workers and supervisors do not have the required efficiency and accuracy, they may have to place design reservations in large proportions that result in a high cost of construction in general. This has become a real burden on every developer in light of the high construction cost due to the significant increase in land prices,” he explained.

For his part, Mohamed Al-Bostany — Head of the New Cairo and New Administrative Capital (NAC) Developers Association — said that the real estate market has seen a lack of clarity since the supply chain crisis and then the outbreak of the Russian-Ukrainian War, which led to hikes in the prices of building materials.

Al-Bostany added that the approach of value engineering is the construction of a facility that is safe and well-designed at the lowest cost.

“This approach originated 40 years ago, and now that we are under the current circumstances, this is the best engineering solution to preserve the investments and profits of the project by finding alternatives with raw materials that achieve the best results with the largest possible cost savings,” he pointed out.

Furthermore, he highlighted the importance of value engineering in developing property projects with the same quality and the same components but at a lower cost, which is implemented through consulting offices specialised in working with this approach.

Additionally, value engineering is concerned with reducing construction costs without compromising the quality and safety of facilities by finding alternatives or solutions for construction items, which has a great impact on reducing spending in construction in light of large increases in the prices of raw materials.

Islam Yehia — Head of the Commercial Sector in a major real estate company — disclosed that the current period is the most appropriate time for companies to apply value engineering in the construction of their projects and that it would benefit both clients and developers.

He also pointed out that the global economic crisis led to unprecedented spikes in the prices of raw materials and building and construction requirements, which was directly reflected in the cost of implementing projects.

Topics: building

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