Half your construction cost is rupee-exposed and half tracks the dollar. The contract structure that protects your budget is not the one most builders offer.
What moves with the rupee, what moves with the dollar
Construction costs split roughly into:
- Rupee-stable (~55% of total): labour, brickwork, sand, crush, plaster, paint, local fittings.
- Dollar-tracking (~45% of total): steel (because raw iron ore is imported), cement (energy and clinker), imported tiles, imported fittings, German/Italian fixtures, Daikin compressors.
If the rupee weakens 10% against the dollar over your build, your dollar-tracking line items rise roughly 10%. On a PKR 3 crore project, that's PKR 13.5 lakh out of pocket.
How standard contracts handle this
Most contracts pass the risk to the owner. The contractor quotes today's rate and if material prices rise, you pay the difference. This protects the contractor and exposes you fully.
How we structure overseas contracts
For overseas clients, we offer two contract structures:
- Fixed-price, indexed. We quote a fixed total. If steel or cement moves more than 7% from contract date, we share the difference 50/50. Below 7%, we absorb. This caps your downside.
- Cost-plus, capped. We charge actual material costs plus a 12% management fee, with a hard cap at 105% of the original quote. You see every invoice; we share any savings.
What we don't do
We don't quote in dollars. PKR is the contract currency. Quoting in dollars sounds fair but actually it hides the rupee-stable portion, which doesn't track the dollar at all. A USD-denominated quote can over-charge by 5-7% for the rupee-stable portion.
The right strategy if you're worried about depreciation
Lock in your steel and cement orders early. We can hold deposits with the mill and the cement supplier in the first two months of a project, fixing roughly 35% of the build cost against future price moves. The remaining material lots are bought as the project progresses.
The honest reality
Rupee depreciation is unpredictable. We've had clients lose 8% to it and others gain 3% because the rupee actually strengthened during their build. The contract structure can absorb the noise; it can't eliminate it. Plan a 5% contingency into your budget regardless.