Iran’s construction industry to perform well

Byjirong

Updated Thu, 04 Aug 2016 18:08:35 GMT

According to Timetric’s Construction Intelligence Centre, Iran’s construction industry is likely to perform well up to 2020, with growth driven by investments in energy, residential and infrastructure construction projects. Improvements to investor and consumer confidence due to the lifting of international sanctions will also drive funds into construction projects.

The industry’s output value in real terms is expected to rise at an annual average of 6.3% up to 2020; a marked improvement from the annual growth of -1.6% during the past five years. The industry is consequently expected to rise from a value of US$76.5 billion in 2015 to US$104.1 billion in 2020. The residential and energy construction markets will lead the industry, reaching US$50.2 billion and US$28.9 billion in 2020, respectively.

Residential construction was the largest market in the Iranian construction industry up to 2015, accounting for 46% of its total value. Over the next five years, the market will be supported by rapid urbanisation and population growth. Government efforts to reduce the country’s housing deficit will also help the market to grow over the next five years.

Accounting for around 24% of the industry’s total value in 2015, energy and utilities construction was the second-largest market in the Iranian construction industry. The market is set to increase in importance over the next five years, to account for 25.5% of the industry’s total value in 2020. It will be fuelled by the government’s plans to meet the country’s growing demand for power and their focus on developing renewable energy sources.

“Although Iran’s construction industry is expected to pick up significantly, there are several risks associated with the outlook; most notably low oil prices, high labor costs, corruption and political risk,” comments Danny Richards, Lead Economist at Timetric’s CIC.