Prime Minister Imran Khan’s vision to enable the low-income groups in the country to afford their own homes, create a big number of job opportunities and spur economic activity in the construction-related industries.
As per his vision to boost the construction sector and revival of economy, the prime minister had announced the first ever package in the country’s history for the housing sector that will not only fulfill the Pakistan Tehreek-e-Insaf government’s promise of building five million houses but also gear up business activity in more than 40 industries.
The prime minister also announced Rs 30 billion subsidy for the poor people and this subsidy would cater to the first 100,000 houses to be constructed under the Naya Pakistan Housing Programme — which means a subsidy of Rs 300,000 on each house. Those borrowing from the bank to construct their homes would get loans on subsidized interest rate of 5 percent for a 5-marla house and 7 percent for a 10-marla one. The State Bank of Pakistan and all other banks have been asked to set aside 5 percent of their portfolio for the construction industry, which comes to about Rs 330.
To ease it further, the one-window operation, under the Naya Pakistan Housing Authority, has been launched in all the four provinces. A National Coordination Committee on Housing Construction and Development has also been set up to attend to the various obstacles. Taxes have been reduced in the provinces and the complicated procedure of getting NOCs (no-objection certificates) has been eased out.
Besides, in a major incentive for investors, the government has decided not to question the source of investment, made until December 31, 2020. The government does deserve to be applauded for successfully convincing the international community to allow this amnesty of sorts in view of the country’s ailing economy. The expensive bank loans — coupled with the cumbersome paper work, involving guarantees in particular — have thus far discouraged people in Pakistan to exercise the mortgage option to build or purchase home.
The prime minister unveiled the plan for revival of the construction sector after the maiden meeting of the newly formed National Coordination Committee on Housing and Construction in early July.
There will be 90 percent tax exemption on the construction activity related to the Naya Pakistan Housing Scheme. The general sales tax has been reduced from 15 percent to two percent. While withholding tax has been abolished on the construction material.
Commenting on the government’s initiative, a leading property developer and businessman Ejaz Gohar was of the view that it was the first plan, which would make it affordable for low and middle income people to build houses with low rate mortgage financing.
The commercial banks would allocate five percent of their portfolio for the construction activities, he said and noted that some Rs 20 trillion was circulating in the informal unregistered economy and now was the opportunity for the people to get the huge amount of money declared by investing in the real estate sector by December 31, 2020.
“Now a person with an income of Rs 30,000 to Rs 100,000 could build a house of 5-marla with the mortgage financing at 5 percent.”
Ejaz said the mortgage financing was started in the United States 82 years back to kick-start its economy and Pakistan was far behind in terms of the home mortgage financing as compared to the developed world. After announcement of the special package, the State Bank of Pakistan (SBP) decided to set a mandatory target for banks so as to extend mortgage loans and financing for developers and builders.
“The present government deserves credit as not only it did not shy away from the challenges and remained focus on the task but also elicited participation from the private sector in a positive manner,” said Muhammad Ejaz, Director, Arif Habib Corporation Limited. He said the government undertook an elaborate process of consultation and engaged all relevant stakeholders. Instead of rushing to force any half-baked plan, it maintained a steady and gradual progress towards developing an effective system through creating and reforming institutions.
At the same time, he said, creation of ease-of-doing-business and reforms in the fore-closure laws would enable institutional funding support, which was extremely positive.
“This includes refinance facilities from the Pakistan Mortgage Refinance Company (PMRC) backed by funding from the World Bank, which is working towards making long-term affordable developer and end-buyer mortgage, a reality in the country,” he said.
The package announced by the prime minister for the housing sector was widely eulogized and the experts associated to the construction and real estate have pinned great hopes in the success of programme. They foresaw massive economic activity in its wake as they thought that revival of the construction sector would definitely result in economic revival, jobs creation and overcoming the paucity of residential units in the country.
Mohsin Sheikhani, Chairman of Associations of Builders and Developers of Pakistan (ABAD), welcomed the package with remarks that in 70 years for the first time any government had declared the housing sector an industry. “This has been under discussion at every forum. This measure will help achieve the target of constructing five million houses and create 15 million jobs,” Sheikhani said. “If initially the government starts with one million houses, it will create 2.5 million jobs and revive 40 to 72 allied industries. The package will be very useful for the construction industry,” he said.
He noted that COVID-19 pandemic had slowed down the economic growth across the world but “we believe that brisk advancement on this project will help bring economic turnaround. “The Construction industry is backbone of our economy and its flourishing will help overcome housing unites shortage, growth of allied industries and jobs creation,” Sheikhani said.
Since, the prime minister has fulfilled his promise to incentivize the housing sector, now it is responsibility of the builders, businessmen and the common people to fully benefit from these incentives and contribute to the government efforts for betterment of economy, houses for the poor and jobs creation