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Openness of transport infrastructure, provision of utilities and mortgage financing a boom for construction

Openness of transport infrastructure, provision of utilities and mortgage financing a boom for construction

Real estate has stable position; providing shelter to every Pakistani a good step

Interview with Syed Muhammad Talha – CFO, Javedan Corporation Limited and International Builders and Developers (Pvt) Ltd

Syed Muhammad Talha is the Fellow member of the Association of Certified Chartered Accountants and holds a Master’s degree in Commerce from Karachi University. He completed his articleship from EY Ford Rhodes and Co. Chartered Accountants, where he gained experience of diverse sectors serving clients spanning the Financial, Manufacturing, Trading and Service industries. Before joining the Arif Habib Group Company, he served Al-Abbas Group and Ghulam Farooq Group. He is serving as a Director of Safe Mix Concrete Limited. Further, he is also the Chief Financial Officer of Javedan Corporation Limited and International Builders and Developers (Pvt) Limited. He has a working experience of more than 16 years in various diversified capacities including property operations.

Javedan Corporation Limited (JCL) has launched Naya Nazimabad housing project. It is now an established name in the Karachi real-estate market, owing to the quality of development at affordable costs, as well as being one of the ideal places to live in, not only due to its prime location, but being a gated community, with 24×7 security arrangements, attractive green and clean environment, , and integrated amenities. Given its positive attributes, as well as the comfort of getting a clean title, investing in property in Naya Nazimabad has provided some of the highest returns in the Karachi real-estate market. In turn, owing to the strong underlying value, banks are happy to provide mortgage finance to home-buyers in Naya Nazimabad.

PAGE had an exclusive conversation with Syed Muhammad Talha about the construction and real estate in Pakistan.

Following are the excerpts of the conversation:

Construction industry depends on the availability of transport infrastructure, provision of utilities and mortgage financing. All these facilities are always available in city areas but due to the lack of commitment shown by the previous governments in these sectors, there are some important measures needs to be taken by the current government. Overall real estate market is stable except Karachi wherein Honorable Supreme Court of Pakistan imposed ban on high rise building resulting in slowing down the pace of construction industry in Karachi. However, after the improvement in law and order situation of Karachi, prices of most of the housing societies especially in Karachi have gone upwards. I think there is a serious need to review this ban as it is not directly related to water consumption. Families which are living in houses or in apartments would consumed same quantity of water. The real issue is the unplanned infrastructure and construction of high rise building on those areas where no proper infrastructure facilities are available.

For instance, there are a lot of thickly populated areas where NOCs to construct high rise building are being awarded to the builders which in turn has created the chaos amongst the citizens. I am of the view that this restriction shall not be imposed on developers who do have planned master community development and obtained relevant approvals from the relevant approving authorities.

On the one hand we are declaring emergency in housing sector and have announced to construct 5 million houses and on the other hand while restriction on high rise building is still being imposed. Pakistan is not a socialist country nor has adequate development fund to finance such huge numbers of housing units in Pakistan in 4 to 5 years. In fact, we are obtaining loan to serve markup. Government alone cannot handle this issue. There is a need to make some public private partnership to achieve the target and including Association of Builders and Developers (ABAD) and local and international builders and developers and accommodate them by providing land on concessional rates with the provision of utilities, transport infrastructure and mortgage financing upto 30 to 35 years period to enable easy repayment installments.

There are many imported items involved in the construction and the declining value of Pakistani currency against the dollar from the last decade has almost doubled the construction cost. Further, increasing regulatory duties and taxes escalated the material cost involved in the construction industry have adversely effected this industry. The rising cost also causes the developer to increase its sales value, which in turn makes life difficult for the person who is willing to purchase his home.


In Pakistan, more than 50 percent of masses are living below the poverty level who cannot even think of purchasing a plot or katcha house. The increased prices in housing sectors have indulged most of the middle income class people to live on rent. 10 percent of upper middle class can afford to purchase plots or house or flats at a place of their choice. 15 percent of average middle class can purchase plots or house or flats at a better place but not on a prime location. Most of them would prefer to purchase on installments so that they may arrange the cash to pay off the price. Approximately, there are only 5-10 percent of the population who are able to purchase a property. Just imagine, more than 50 percent of Karachi population is living in katchi abadis (raw settlements).

Prices of the land have increased at higher pace since the last decade, which is evident from the fact that the property that could have been acquired at Rs. 1 million, has now been increased by around 200 to 300 percent. The economic condition of the country is under tremendous pressure due to the increasing deficit and debt financing which pushes the government to impose more indirect taxes in order to lower down its deficit and to comply with terms of the financer. Such trend increases the prices of the consumer products, which badly impacts their monthly budget and brings down their affordability to a lower extent.

Construction material purchased involves imposition of federal sales tax @ 17% on the other hand there is no output tax involved in real sector therefore the impact of sales tax result in the escalation of cost for the developer as it cannot pass its impact to the customer. Such imposition of sales tax on the construction material causes the cost to escalate which restricts the developer to set the affordable prices for the general customer. Overseas Pakistanis and end users in Pakistan are mostly non-filers. Previous government imposed law as a person who is not the filer cannot purchase a property exceeding Rs.4 million, however, the current government has lifted this ban. Now this will definitely increase the purchasing ability of the overseas Pakistanis and end users.

RCC structure based on columns, beams and slab with suitable finish costs much higher than load bearing structure. Low cost housing scheme consists of loading bearing wall structure with very simple finishes and fixtures. Low cost housing scheme also depends upon the area of plots which I think should not be more than 80 sq. yds. Low cost housing scheme is actually the basic need of millions of Pakistanis. Basically, we are living in an era where saving of one’s income is very lower side. The shortage of housing, especially for the lower and middle-income groups, is a pressing matter for the country. The new government is committed to addressing this extremely important matter, which should not only be beneficial for the social fabric, but also in terms of boosting economic activity for a multitude of industries, as well as for creating jobs at all levels.

Last year, ABAD took an initiative to launch the low cost housing scheme for the middle and lower class income people. They offered a total of 20,000 units of 120 sq. yds. each at a price of Rs1.5 million. This offer was overwhelmed by the people which depicts that there is actual need of low cost housing units in Pakistan. We hope that Naya Pakistan would be able to address this basic need and provide shelter to every Pakistani which is their constitutional right.

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