KARACHI, May 30: The current political uncertainty and judicial crisis, coupled with reports of holding of general elections in October this year, have slowed down construction activities relating to private sector mega housing projects.
Construction activities become sluggish ahead of general elections. But currently, political and judicial crises, too, have caused jitters among investors.
Chairman, Association of Builders and Developers (Abad), Hafiz ur Rahman Butt, told Dawn on Wednesday that the investors who plan long-term investment in private housing projects, have been holding back their plans by adopting a wait and see policy.
They are now more interested in seeing which government, progressive or fundamentalist, is installed after elections and what would be their future economic policy.
He said as the budget is also next month, many builders become lethargic in procuring construction material, like cement, ceramics, sanitary, paint, wooden items, etc., from the market anticipating that budgetary measures may cause increase or decrease in their rates.
On the contrary, he said many people on individual basis have continued renovation and modernisation of their old houses.
During the last two months, hardly one or two new grand housing projects were launched in the mega city.
Prior to the judicial crisis, some four to five new projects had been arriving every two months, Butt said.
When asked as to why electronic and print media have been flashing advertisements for new projects for the last few months, he claimed that these were mainly old small projects.
He said in reality, investors have been out from the construction market for the last one year since the government imposed two per cent capital value tax (CVT) on property transactions in last year’s budget.
The Association has urged the government to remove the CVT.
Investors in the property market are mainly expatriates who had been sending remittances in Pakistan and buying property to safeguard their investment.
At the provincial level, the Punjab government charges three per cent stamp duty while the Sindh government has levied five per cent stamp duty. There should be one per cent stamp duty at the provincial level. Besides, the local government is also collecting one per cent tax on property transactions which is unjustified, he added.
The real estate market has been laggard for the last two years owing to thin buying and selling activities in plots and bungalows as investors are on the sidelines for the last two years.
Even in many areas, either prices of plots and bungalows are unchanged or have declined by 10-30 per cent depending on the locality.
According to third quarterly report of the State Bank of Pakistan for 2006-2007, local cement dispatches rose by 25 per cent (15.4 million tons) in July-March 2006-2007 as compared with 13.4 per cent (12.2 million tons) growth in the same period of 2005-2006 due to a boost in construction activities on the back of mega projects, as well as continued large development spending on building infrastructure and considerable rise in foreign direct investment.
The report said the FDI in construction, cement, metal, basic metal and ceramics was recorded at $136 million in July-March 2006-2007 as compared to $93 million in same period of last fiscal.
Production of steel stood at 1.475 million tons as compared with 1.188 million tons.