KARACHI: Builders and developers said on Friday the federal budget will not help the masses get affordable housing.

According to Association of Builders and Developers (ABAD) Senior Vice Chairman Mohammad Hassan Bakhshi, a rise in the federal excise duty (FED) on cement from Re1 per kilogram to Rs1.25 per kg will increase the price of a 50-kg cement bag to over Rs550.

Finance Minister Ishaq Dar claimed in his speech the cement industry will absorb the increase in the FED.

There is a shortage of more than one million housing units in the country. Additional demand of 300,000 units is being added to this gap every year. Availability of funds is a major hurdle as banks shy away from offering long-term financing.

To overcome this hurdle to housing loans, the government is going to launch a Risk-Sharing Guarantee Scheme for the low-income segment. Under this scheme, the government will provide 40pc credit guarantee cover to banks and development finance institutions (DFIs) for home financing of up to Rs1m. The government has allocated Rs6 billion for this purpose. This facility will also be available through microfinance banks.

“The above measure will benefit only 6,000 households, which is negligible in view of the housing shortage,” Mr Bakhshi said. He added that the increase in the Public-Sector Development Programme will not benefit builders and developers.

In order to bring this sector into the tax net, the government had announced last year a final tax regime on the basis of a fixed tax per unit area for builders and land developers. However, the scheme failed to achieve the desired results. The government has proposed that the scheme be withdrawn. The ABAD official said Mr Dar has taken a wrong decision that will hurt the construction industry.

Mr Dar claimed in the speech that ABAD had promised the generation of Rs28bn under the fixed tax regime last year.

The ABAD office-bearer stated that builders could not generate the targeted tax revenue because there was no proper mechanism to collect the levy for the first three months of the last fiscal year. After that, the FBR imposed a new property valuation system, which created further chaos.

Mr Bakhshi said the government has again given incentives to steel bar makers, although they have made a cartel and kept the rate at Rs85,000 per tonne against the international rate of Rs55,000 per tonne.

The budget imposes no additional tax to ensure stability in commodity prices, according to Mr Dar

Commodity wholesalers said the budget does not include any measures for bringing down the prices of essential commodities.

According to Karachi Wholesale Grocers Association (KWGA) Chairman Anis Majeed, the overall budget appears to be reasonable under the current circumstances.

The finance minister said the budget imposes no additional tax that may push up the prices of commodities.

All Pakistan Motor Dealers Association (APMDA) Chairman H.M. Shahzad said the government failed to take any big decision about the auto sector. As for the reduction in withholding tax on the registration of motor vehicles for filers, he said the government just wants to lure buyers into paying taxes. Otherwise, it is not a big step, he added.

However, he said the government has raised the regulatory duty on 586 items by 5-15pc and that its impact will be on consumers.

A leading local car assembler, who asked not to be named, said the government accepted some of the demands made by the auto assemblers. However, he did not believe that the proposed reduction on withholding tax on the registration of motor vehicles for filers will have any significant impact. “It is an advance tax, which will not boost car sales substantially,” he said.

In order to encourage the filing of tax returns, withholding tax on the registration of motor vehicles is proposed to be reduced from Rs10,000 to Rs7,500 for vehicles of the engine capacity of up to 850cc, from Rs20,000 to Rs15,000 for 851-1,000cc and from Rs30,000 to Rs25,000 for 1001-1,300cc. The rates for non-filers will remain unchanged.

The current concessionary rate of customs duty and taxes -- 50pc of the total applicable duty and taxes – will continue on the import of hybrid electric vehicles (HEVs) of up to 1,800cc. A 25pc concession on total duty and taxes will be applicable to vehicles with the engine capacity of 1,801-2,500cc.

Auto Development Policy 2016-17 provides for incentivising fully electric vehicles to promote fuel conservation and arrest environmental degradation. A package for relief in duty on these vehicles will be announced within three months.

In order to promote the use of energy-efficient motor vehicles, the reduced rates of sales tax at the import stage are proposed to be made applicable on the local supply of these vehicles as well.

Auto assembler welcomed the step, saying this will at least provide some price relief to consumers.

Published in Dawn, May 27th, 2017