The successive governments in Pakistan could not launch the housing schemes for the complex and time-consuming process the housing sector development involves. The country spends more than US$5 billion on construction from its annual development budget. The housing sector, however, gets less than half of the amount allocated for construction each year.
In view of the burgeoning population and rapid urbanization, the new government led by Prime Minister Imran Khan should announce affordable housing schemes in Pakistan. The housing sector holds strong backward and forward linkages with other industries. No doubt, its growth unleashes growth in these related sectors. The construction of houses gets at least 40 other industries involved creating enormous job opportunities for the people. For the development of housing sector, government must reduce excise duty on cement, eliminate excise duty on wires and cables, increase in limit of tax exemption on mark-up, bring improvement in lending ratio and increase in maximum limit of loan.
A major reason behind the rapid growth and expansion of slums around major cities is the skyrocketing prices of real estate. Better housing is also needed from security point of view in the country, which is facing an insurgency-like situation in its southwest and northwest. Slum areas in major cities like Karachi pose a serious security threat. The unplanned constructions in slum areas created plethora of problems like environmental mismanagement, filth and garbage, out-flowing drains, poor sanitation, congestion, development of unhygienic and hazardous practices and rise in crime rate. The power theft, contamination of water, illegal connections of Sui gas, electricity and water developed as culture in these slums. The corrupt officers of the relevant department made quick millions for providing illegal water and power connections to the people of slum areas.
Over the past one decade, the businessmen associated with the real estate market made quick millions. The country has witnessed a real estate boom as the new builders and real estate developers are announcing new housing schemes across the country. The property prices are going up continuously. It is unaffordable for common man to buy a property for his residence. If he resorts to banks for loan, the mark up on such loans is so high that he finds it almost impossible to payback the borrowed money. The real estate sector constitutes 2 percent of the country’s GDP. It has the potential to grow further to account for 5 percent of GDP.
The investors in Karachi, the country’s commercial capital, have shown strong interest in buying properties in Bahria Town, Asia’s largest real estate developer and private housing society. In view of the security concerns, Bahria Town resorted to building gated communities in major cities. The prices of residential and commercial properties in Bahria Town are continuously increasing alluring investors who are actively engaged in ‘buying and selling’. It is only Bahria Town and some private developers, which are still alluring investors all over the country.
Properties in Dubai
In 2014, Pakistanis reportedly purchased property worth 7.5 billion dirhams, and became the second largest community in the list of expatriate property buyers in Dubai. It is a big challenge for the government to divert investment flow from United Arab Emirates (UAE) to the domestic property market by taking serious measures to improve law and order situation in the country. What actually attract the Pakistanis buying properties in Dubai are firm real estate laws and investment security. The government needs to take some meaningful measures in the next budget in June to revive growth in real estate, which is an important sector of the country’s economy.
Boom in Gwadar
Presently, there is a real estate boom in the country’s emerging port city of Gwadar. The businessmen from all over the country and abroad are showing interest in the area. Gwadar is currently the focus of speculative trade in real estate that has touched almost a frenzy level as brokers are booking sale and purchase orders for the property in Gwadar that does not exist at present but is being planned for future. While the buyers seem anxious to buy more land in Gwadar, the brokers are also over-zealous The rich investors are being lured into buying industrial plots in industrial estates and residential plots in housing schemes in and around Gwadar on payment under different packages.
The government’s announcement to establish a huge industrial estate, a free trade zone and other projects, including oil terminals, huge refineries, attracted the investors again to invest in Gwadar real estate. The Balochistan government has allotted land for the construction of warehouses in Gwadar. The plots have been allotted in the Gwadar Industrial Zone for construction of warehouses to facilitate importers and exporters.
The government is reportedly offering more concessions to foreign investors for the development of second phase of Gwadar port project. In the past, a number of countries, including those of the region, had expressed their willingness to establish duty-free industrial zones in Gwadar. The investors and entrepreneurs particularly from Central Asia, Afghanistan, China, South Korea, Japan and Singapore showed a keen interest in establishing industrial estates in Gwadar. China and South Korea are supposed to set up their tax-free special industrial development zones (SIDZs) in Gwadar. The SIDZ is located on the north of Gwadar town at a distance of about 30km from the port. The SIDZ project would help in increasing import and export of the country. With the functioning of industrial zone, Gwadar would become a hub of industrial and trade activities. The 3000 acres of land has already been reserved for the development of Gwadar Industrial Estate (GIE) to meet the demand of industrial plots and to cope up with the needs of modern industrialization in the port city.
Efforts should be made by the government to revive the real estate sector. It must announce a drop for interest rates of mortgage loans in a move to encourage potential investors to invest in properties.
The government must take serious steps to check speculations in the property market and should bring the prices of the real estate within reach of the common people. Such steps will also restrict the growth of slum areas in the cities.