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Real estate: New hopes

Steps taken to re-activate the stalled business

May 21 - Jun 03, 2001

The business activity in the construction industry and the Real Estate sector, once used to be described as the engine for generating employment and a haven for the investors, has come to a standstill.

Consequently, over 40 allied industries are also suffering and are forced to lay off a large number of workers associated with these industries. These industrial units play an important role in supplying building material including steel bars, cement, wood craft, glass and other fixtures, electric material, paints, ceramics, marble tiles etc and many other related units which are lying idle.

Spelling out various reasons for this inactivity, sources in the real estate business said that beside the overall economic recession faced by the economy there are other factors which proved disastrous for this sector. For example, sources said that the House Building Finance Corporation (HBFC), the only source for financial back up to this sector has stopped disbursement of loans for house financing for the last one year. As a result, over 350 incomplete housing complexes and apartments are lying held up for want of finances. The HBFC has stopped disbursement of loans on the ruling of the court endorsed by the Supreme Court of Pakistan that only loans should be disbursed in accordance with Shariah. Now the HBFC is waiting for Islamization of the Banking System. Another major factor, which proved disastrous for business activity in the housing sector, is the campaign launched by the present government for housing survey and distribution of tax forms. This campaign spread uncalled for panic among the buyers or investors. Generally speaking most of the investors now find it save to buy and sell dollars where no declaration is required as compared to purchase or invest in the housing units.

Another factor was the high rates of property valuation fixed by the provincial governments. In some cases, where the official value of a residential plot of 400 sq. yard has been fixed at Rs.10 lakh and the buyer has to pay stamp duty on that rate, the actual market value of that plot is not more than Rs 5 lakh. Such rules are adding to the confusion in this industry.

Sources suggested that government should remove the doubts among the people that the housing survey was meant for documentation purposes and not for taking any punitive measures against the plot or householders.

Meanwhile, the Chief Executive, Gen. Pervez Musharraf has approved a national employment strategy, targeted to create nearly two million additional job opportunities during the next financial year.

The employment strategy emphasizes to reactivate construction and housing industry in view of its high employment generating capacity.

Reviewing the employment strategy presented by the Planning Commission, the Chief Executive has stressed upon the need for major supporting policies by the government to maintain the present employment levels and generate additional job opportunities in the country.

He has endorsed that construction and housing sectors as areas carrying the dual benefit of providing housing to the shelter-less besides generating major economic and manufacturing activities leading to creation of skilled and unskilled jobs.

The Chief Executive has also accorded approval to the launching of major low-cost housing projects both in the urban and rural areas. He has also directed that consideration be given by the provincial governments to the possibility of allowing ownership rights to small houses built on state land in the rural areas on nominal payment. He also directed the ministry of housing to draw up housing program for the urban areas and in particular for dwellers of the katchi abadi to enable their shifting to cleaner and healthier environment.

Gen. Pervez Musharraf also directed the ministry of finance to work together with the State Bank to generate special funds for the housing sector to be disbursed as loan at affordable cost to the middle and lower income groups.

Pakistan is estimated to require 400,000 additional housing units every year against the 160,000 units being added annually.

The Board of Revenue, Sindh has also notified a downward revised valuation table in respect of urban properties located in Karachi.

The minimum value per square yard of open residential plot under category A-1 is Rs4050 for category 1, category II Rs 2,250, category III Rs1350, category IV Rs900, category V Rs540 and category vi Rs270.

Open commercial plot minimum value per square yard category A-1 Rs 9,000. Rs. 6500, category II, Rs4050, category III Rs2700, category IV Rs1440, category V Rs900 and category VI Rs630.

Built up commercial property minimum value per square yard of covered area of ground flour plus covered area of additional floors if any: Category A-1 Rs10,800, category-1 Rs9000, category II Rs5, 850, category III Rs3, 600 category IV Rs, 430, category Rs1, 620 and category VI Rs1, 080.

Built up industrial property value per square yard of the entire plot as per item 3 plus Rs. 160 per sq. ft of covered area.

Built up Flats. Minimum value per square foot of covered area Category A-1 per square ft of covered area Category A-1 Rs675, category-1 Rs585, category II Rs405, category III Rs270, category IV Rs225, category-V Rs135 and category VI Rs70.