The world over, the construction industry is considered a ‘mother industry’ and in Pakistan, after agriculture, it is the second largest provider of jobs to thousands of unskilled, semi-skilled and skilled workers. The industry supports more than 50 allied industries, including cement, electrical fittings, paint, steel and tiles. In other words, this important industry is a major booster of Pakistan’s economy and contributes 2.53% to the Gross Domestic Product (GDP). If certain hurdles can be overcome, this number can go beyond 10% within two years.
In the West, whenever there is an economic crisis, governments provide special incentive packages to the construction industry to support their economies. Unfortunately, until recently in Pakistan, no government has focused on the construction industry. So it is a matter of pleasure that the present government, led by the Prime Minister, Imran Khan, has given construction the status of an industry and announced a Rs 100 billion relief package in April 2020.
The package has two major objectives. The first is to bridge the affordable housing gap through the Naya Pakistan Housing Program (NPHP) initiated in April 2019 and which has a goal to build five million houses in five years. The second is to boost the economy by creating employment opportunities. The package includes tax incentives, waivers and subsidies for builders, developers and property owners; an important aspect of the package is that investors would not be asked about the sources of their income.
Furthermore, on the instructions of the government, the State Bank of Pakistan has directed that commercial banks allocate five percent of their portfolios to house financing at low mark-up rates and the government announced a subsidy of Rs 0.3 million for the first 0.1 million houses. Low-cost housing has long been one of the most important goals for the Association of Builders and Developers of Pakistan (ABAD).
Although the incentives have resulted in increased activity, the NPHP has not taken off in Sindh due to political differences between the federal and Sindh governments. I hope both governments will realise that the national economy is suffering due to these differences and will endeavour to bring forth positive solutions, so that low-cost housing schemes can come into being and enable people to build homes while boosting the construction industry.
This initiative is even more important when one considers the plight of the people made homeless after the government’s anti-encroachment drive, specifically along Gujjar Nallah and Orangi Nallah. Houses there were demolished despite the fact that the owners held official sub-leaseholds. This matter has become an international issue and the UN has demanded that a stop be put to the forced eviction of almost 0.1 million people.
Furthermore, given that an estimated 54% of people in Karachi live in katchi abadis, it is high time that they are provided with proper housing. ABAD has offered to reconstruct the katchi abadis so as to phase out slums (and beautify Karachi in the process), but we have not been granted approval for this.
The construction industry continues to witness hurdles which have shaken the confidence of builders and developers as well as investors and allottees. For example, one the biggest drawbacks the industry witnessed was in May 2007, the then Chief Justice of Pakistan, Justice Saqib Nisar, banned the construction of high-rise buildings in Karachi. At the time, over 300 projects were in the pipeline and were affected by the ban. The ban was eventually lifted after almost two years and during the intervening period, over Rs 600 billion in investments was stuck and thousands of daily wage earners were made jobless and frustration among the builders’ fraternity reached its peak.
Later, the present Chief Justice of Pakistan banned the conversion of residential plots located on commercial roads in Karachi into commercial ones. As a result, work came to a halt for many builders and developers although they had paid conversion fees (Rs 22 million for a 1,000 square yard plot) to the Sindh Building Control Authority (SBCA), which then failed to give the required approvals for the building plans. This continues to affect builders and developers and they are now considering moving their capital to construction-friendly countries.
What can be done to sustain the current construction boom?
1. Approval systems for building plans should be transparent, efficient and simplified. Currently, obtaining approvals can take almost 18 months and builders and developers have to obtain nearly 20 NOCs before getting final approvals from the relevant building authorities (this is especially true for Sindh; in Punjab and KPK the approval process is relatively easier). The government should establish a panel or board consisting of private sector engineers and architects to provide approvals within a shorter period of time (two to four weeks). Similarly, approvals for utilities, including electricity, gas and water should be centralised to ensure efficiency.
2. The Master Plans of all cities and towns should be updated so that they can be developed in an organised manner.
3. The federal and provincial governments should establish a ‘Land Bank’ consisting of digitised records of designated areas that are available for constructing commercial and residential projects. Land from this bank should be given to builders and developers via open auctions to maintain transparency.
4. New ‘cities’ should be established near larger ones to tackle overpopulation.
5. Allied industries should be given special incentives to control the price of building materials. The government should evolve a mechanism whereby the cost of construction materials is not increased at least for three years (the average completion time period for most of projects).
6. A dedicated financial institution should be established to cater to the needs of builders and developers; this includes offering loans at lower mark-up rates than those offered by traditional banks.
7. Illegal construction and practices should be stopped by law enforcement agencies to ensure that faulty buildings are not constructed. A separate board should be established to oversee that builders and developers follow by-laws.
8. A one-window digital system should be established so that builders, developers and the public can submit their building plans electronically and obtain approvals in an efficient and transparent manner.
Mohsin Sheikhani served Association of Builders and Developers of Pakistan (ABAD) four times as Chairman and is Patron-in-Chief of ABAD’s Allied Panel. He has also represented Pakistan at the World Bank and the Asian Development Bank. email@example.com