Question

why do we prefer steel instead of soft iron for making permanent magnet

Answer 1

. "Soft" magnetic materials don't retain much of a permanent magnetic field when an external magnetic field is removed. Soft magnetic materials have low coercivity. They are typically used in applications where a magnetic field must be turned ON and OFF, such as the cores of DC electromagnets and solenoids. Permanent magnets are made from "hard" magnetic materials - materials that have a high coercivity, such as many alloys of steel and tempered steel. Unlike soft magnetic materials, high-coercivity materials retain a significant magnetic field after the external magnetizing field has been removed. 

Answer 2

Because it have high coercivity.
Unlike soft materials, high-coercivity materials retain a significant magnetic field after the external magnetizing field has been removed.