PM Imran Khan has announced a historic aid package for the construction sector to spur activity
KARACHI: Pakistan is set to see exponential growth in the housing and construction industry, because builders and developers are ready to start around 1,000 new projects worth more than Rs1 trillion over the nine months ended December 2020.
Last week, Prime Minister Imran Khan announced an industry-specific historical aid package with an amnesty scheme – subsidies and tax holidays for investors and buyers – aimed at creating employment opportunities for daily wage earners and reversing the coronavirus pandemic that hit the domestic economy.
“The housing and construction industry will not only attract local investment, but also large foreign investments under the historic package,” said the former chairman of the Pakistan Builders and Developers Association (Ages) Hasan Bakshi while speaking with The Express Tribune.
“Delegations consisting of investors and constructors from countries including Singapore, China and the United Kingdom visited Pakistan before the pandemic outbreak (in China in December 2019),” he said.
It is very difficult to estimate the volume of foreign investment at this important point in time when the world is fully engaged in the war against a pandemic. “Foreign investment will be very large, which in addition to local investment, is expected to bring the potential to get rid of the IMF loan program over the next two years,” he said.
The government is working on the package for quite a long time in an effort to fulfill promises before the 2018 elections to build five million housing units and create 10 million job opportunities during the elected five-year term ending in mid-2023.
Contrary to the promise of the Pakistani government Tehreek-e-Insaf (PTI), hundreds of thousands of people lost their jobs and investment remained stagnant due to the harsh economic policies, which were partially enforced under the latest International Monetary Fund (IMF) loans for 39 months. The $ 6 billion program starts in May 2019.
The current fiscal year is seen as a year of economic revival after three years of economic hardship. However, COVID-19 has extended the recovery phase.
“The share of the housing and construction industry stands at 2-2.5% in gross domestic product (GDP),” said Bakshi who is also a member of the prime minister’s task force for housing.
“GDP from construction in Pakistan increased to Rs343.19 billion in 2018 from Rs320.77 billion in 2017,” according to tradingeconomics.com.
The port city alone will see more than 500 new construction projects by the end of December, because major construction activities have been halted due to the moratorium. “Now the court has revoked the moratorium on multi-storey buildings,” said the former chairman of the Century.
“This (construction) is the only sector that can revive the economy after we have overcome the health crisis (in the coming weeks and months). This will activate more than 70 construction industries and related industries. In addition, there are investors and buyers of housing units. The housing sector remains a safe haven for long-term investors because the stock market has lost strength, “he said.
The aid package offers provisions such as not asking about the source of income from investments. The government will approve potential projects within 45 days. Projects need to obtain an NOC from about 18 departments.
“Usually it takes 1.5-2 years to get an approved project design,” he said.
An average project of 100 apartments with 2-4 bedrooms each can cost Rs 1.5-2 billion. Such projects can be built to be ready to live in 3-4 years.
New projects can be categorized in three sizes; low cost (Rs3,3,5 million), medium cost (Rs3,5-5 million) and high cost (starting from Rs5 million), he said.
Construction activities are expected to begin after Eid al-Fitr (fall late May) and pick up momentum after monsoon rains (June-July).
Published in The Express Tribune, 7 Aprilth, 2020.
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