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A lifeline to the construction industry

July 02 - 08, 2001

The recession in the "Housing and Construction" certainly the mother of industry which is lying idle without any business activity for the last 3-4 years has adversely affected the commercial viability of more than 40 allied industries in Pakistan.

When the construction and housing sector was blooming in Karachi, the allied industries including ceramics, cement, paints, electrical goods, floorings, carpets, tiles and marbles, stone crushing etc had created tremendous business opportunities from Karachi to Skardu. Now this important sector has come to a complete halt in Karachi due to various reasons. Consequently, cement sector is running half of the capacity; re-rolling sector has come to the stand still.

Syed Jamshed Ali Rizvi, Chairman Association of Builders and Developers, and Engineer Zaheer Qadri, Chairman Southern Region ABAD while commenting over the above situation, have expressed the hope that the newly framed National Housing Policy would come to take the housing industry out of the lethargic conditions.

They said beside the general economic recession, some of the government policies such as housing survey, ever-increasing taxes and duties altogether have brought a serious impact on this growing industry. No doubt a large portion of informal economy was active in investment in this sector but this informal or black economy was greatly helpful in creating job opportunities for the poor at a massive scale. Hence this sector deserve a soft treatment in the larger interest of the poor. The ABAD leaders felt that exemption of 150 sq. yard plots and 1000 sq. feet covered area of flats have been exempted from all sorts of taxation is really a step towards regeneration of business activity in this sector. Generally speaking, the new housing policy announced by the government is supposed to revive this sector, however the aspect of implementation of the policy in letter and spirit is the pre-requisite for achieving the desired results. Jamshed citing the example of the cement sector where the government had announced some relaxation in terms of taxation but practically speaking after announcement of the relaxation in the budget, actually the prices have gone up by Rs550 per truck which carries 200 bags or 10 ton of the cement. This is a good example of contradiction between the policy and its implementation.

Zaheer Qadri pointed out that availability of infrastructure prior to start of construction of a new housing scheme should be made mandatory for the development agencies to attract investment in the housing sector. He cited the examples of various localities where KDA has allowed for construction of housing units without availability of infrastructure facilities like water, sewerage, electricity, gas or telephones. The best example is the localities like Gulistan-e-Jauhar, Scheme 33 or Hawks-bay schemes in Karachi. The development charges have already been received from the allottees yet the development work has not yet been completed in these areas. The lack of infrastructure facilities is one of the major hurdles in the promotional activities in the housing sector, he said.

Jamshed and Zaheer observed that it has been agreed in the newly announced housing policy that the construction work on 262 housing projects held up for quite sometime on account of violation of building rules be resolved shortly. These held up buildings will be regularized to allow them completion. However despite the decision, no SRO has been issued in this regard so far, consequently the policy has not brought any visible move in the industry so far. They urged the government to ensure that the policies announced are also implemented in its true spirit to get the positive results. The corrupt government machinery should not be allowed to mar the good decisions for personal gains.

Welcoming the new housing policy ABAD leaders said that the present government's intention to address genuine issues faced by the people is really reflected in this policy. Since any government in the past never took the housing sector seriously, consequently the housing problems continued to pile up with the passage of time. The new policy, they said is aimed at resolving the housing problems at a massive scale in this country. With the generation of business activity in this sector, business will start in more than 75 allied industries, which would naturally address the problem of unemployment in this country, they observed.

They also appreciated the efforts of the government to expand the financing facilities to the level of the commercial banks, which is also expected to produce some positive results in this sector. The banking sector in general should be allowed to provide house financing at an affordable rate to resolve the fundamental need of the shelter-less.


Housing is the basic and fundamental human need, yet millions are caught in the struggle to have a roof over their head. Appreciating the gravity of the situation and realizing the potential of housing and construction as a productive sector of economy, the government directed the Ministry of Housing and Works to formulate the National Housing Policy which was presented to the President and Chief Executive of Pakistan on June 22, 2001.

Housing and construction are well recognized to generate maximum employment opportunities and have contributed to economic revival and growth. Its multiple effects on the economy have to robust potential to generate industrial activities, develop small and medium enterprises (SMEs) self-employment opportunities, business, commerce and trade activities and at the same time encouraging utilization of indigenous natural and man-made resources. It will create social cohesion and environmental improvements. More significantly, the private and informal sectors play a vital role in housing construction. It is high time to alleviate the economic situation in the country, housing and construction sector is harnessed to its fullest potential.


According to the 1998 census, the total number of housing units, throughout the country, was 19.3 million, 67.7 per cent housing was in rural areas and 32.3 per cent in urban areas. The overall housing stock comprised 39 per cent kucha houses, 40 per cent semi-pukka houses and 21 per cent pukka houses. The housing backlog, as estimated according to the 1998 census, was 4.3 million units. The annual additional requirement is estimated around 500,000 housing units whereas the annual production is estimated around 300,000 housing units resulting in a recurring backlog of 270,000 housing units annually. The household size is 6.6 persons and the occupancy per room is 3.3 persons.

It is estimated that to make up the backlog and to meet the shortfall in the next 20 years, the overall housing production has to be raised to 500,000 housing units annually.

The present government, as a priority industry in category "C" has recently notified housing and construction. The usual privileges, concessions, exemptions and remissions have become applicable to this industry in accordance with the Board of Investment policy.


The newly announced policy aims at accelerating housing activity and contributes towards employment generation and economic development.

One of the objectives of the housing policy is to facilitate provision of housing inputs including land, finance, building materials, institutional and legal framework. The policy will also emphasizes to analyze the culture of poverty and the forces generating ever increasing slums and katchi abadis including political, public, social, economic, bureaucratic and environmental forces.

It aims to promote ways and means for housing development by enhancing affordability, saving capacity, human tendencies and potential. It desires to provide safeguards against malpractice, bureaucratic inefficiencies, institutional weaknesses and Mafia assaults.

The policy aims to develop indigenous and cost effective approaches particularly for the low-income groups in the country.

HBFC laws are being amended to facilitate Islamic mode of financing for the house-financing sector.


Under the national housing policy, the provincial and local governments shall identify state and other lands in and around urban and rural settlements for housing developments for immediate action. Land availability shall be enlarged through various innovative measures like land banking on continuous basis to cater to at least 5 to 10 years development plan needs. Land acquisition Laws shall be made simple to make provision for unified, transparent and market value oriented system and litigation minimization. Federal and provincial funding and assistance shall be available for infrastructure, amenities and other developments only in the planned areas. Land disposal systems shall be developed which are unified, transparent and market oriented with open auction policy and exception for special needs. Provision of trunk infrastructure shall be responsibility of utility agencies like WAPDA, PTCL, SNGPL, SSGPL, KESC etc. The cost of trunk infrastructure shall not be an additional charge to the public or private housing development schemes within the planned areas.


Financial institutions and Housing financial institutions shall be encouraged to float long term bonds at market rates to raise housing finance. Housing finance institution shall be promoted to encourage savings and provide credit from community based finance and other sources.

The annual disbursement of HBFC loans shall be enhanced from the present Rs1.2 billion to Rs7 billion over the next 5 years.

HBFC and other financial institutions shall formulate packages of preferential/ confessional mark-up rates with affordable system of installments for repayment to provide affordable credit to low income groups. HBFC shall reintroduce bridge financing and bulk financing of housing projects.

Financial institutions shall be encouraged to give mortgage loans for housing purposes at market rates. All commercial banks shall be encouraged to advance loans for housing and housing projects by earmarking a substantial percentage of their loan portfolio like other industrial and commercial projects. Housing refinance window shall be set up at State Bank of Pakistan for long term funds from multilateral agencies. Institutions maintaining insurance funds, provident funds, EOBI funds etc shall be encouraged to invest a part of their portfolio in the housing and construction sector including long term loaning bonds.

Part of the sale proceeds of valuable public land shall be set aside to provide plots for low income housing and housing for the poor and needy at concessionaire rates.


All new construction of houses on plots measuring upto 15- sq.yards and one apartment having an area of 1000 sq.ft. shall be exempted from all types of taxes for a period of 5 years. Land for housing schemes shall be provided to development agencies and private sector builders and developers on concessionaire rates subject to the condition that proportionate subsidy is passed on to the target group.

Under the new housing policy, stamp duties and registration fees, which are exceptionally high as compared to other countries, shall be adequately reduced to an aggregate total of 1 per cent to enhance registration, improve documentation and increase revenue receipts. Collection of levies like EOBI, education cess, social security, professional tax etc shall be made one window operation. Banks and DFIs shall extend credit facilities for balancing, modernization and replacement (BMR) of machinery used for housing and construction industry. Import of plant and machinery and spares by the housing construction companies, not manufactured locally, shall be exempt from custom and import duties in excess of 10 per cent. This will be in accordance with government notification declaring housing and construction as priority "C" category industry. Guarantees issued by "A" rated insurance companies approved by the Securities & Exchange Commission in respect of earnest money, retention money, performance, maintenance and mobilization advance shall be accepted by various government agencies, departments etc for implementing housing projects.

The duties and taxes on major construction materials shall be rationalized and reduced to make construction more affordable. As a first step excise duty, sales tax and other levies on cement and steel shall be reduced substantially.


The policy says that the provincial governments shall develop packages in which prime state land within urban centres occupied by the katchi abadies shall be offered to the private developers for commercial use provided they arrange and finance up-gradation or relocation of katchi abadis.


To promote rural housing, the provincial governments shall estimate the possibility of granting proprietary rights to individuals and families residing in houses constructed on shamlaat deh DD and state land. Banks and DFIs shall extend credit facilities for balancing, modernization and replacement (BMR) of machinery used for housing and construction industry.

Housing loaning agencies and companies shall provide standard and cost effective designs and plans to the prospective home builders.


The National Housing Policy lays importance on development of comprehensive land information system including inventory and land classification, mapping, settlement patterns, land values, land availability etc as a mandatory requirement.

The development of master plans/ structural plans/outlines development plans shall be mandatory requirement for all urban and rural areas. The concept of integrated development optimizing land use shall be promoted. Development of metropolitan and major urban centres shall be encouraged under the new policy.

Meanwhile, laws facilitating Islamic mode of financing through the HBFC have been finalized and being examined by the law ministry for final approval.

The announcement regarding Islamic mode of financing in the housing sector through financial institutions and the HBFC would be made soon. Once the laws are in place, the HBFC would commence its operations, which were seized for over a year.

Housing policy envisages active involvement of banks and financial institutions. To protect the interest of the financial institutions in the housing sector, broad-based foreclosure laws have been made. These laws would be presented before the Cabinet for approval and would be announced sometimes next month. This would greatly enhance investment in the housing and construction sector.

The housing policy has taken care of the interest of both the private sector and the individual and it was now up to them to take advantage of this policy and meet the shortfall in the housing sector.

There is a backlog of 4.3 million housing units and to meet this shortfall in the next 20 years, the housing policy envisages production of 500,000 units annually. The policy has assured to enlarge availability of land through various innovative measures such as land banking on continuous basis to cater to at least five to ten year development plan needs.

For this purpose land acquisition laws would be suitably amended to make provision for unified, transparent and market value oriented system and litigation minimization.

The emphasis of the policy is to provide affordable housing units to the rural poor and the urban low and middle-income groups. For the purpose the provincial and local governments shall identify state and other lands in and around urban and rural settlements for housing developments for immediate action.

The policy indicates that the government was conscious of rapid increase in the prices and would adopt measures in the implementation of the policy that prices would substantially come down. Similarly, prices of steel should come down as duty on the ship breaking and allied industries had been reduced.

There was a time when foreign investors had started looking into housing and construction industry for massive scale. Arrival of Korean giants Daewoo and other companies in this respect are the glaring example of attractiveness of this sector. However rampant corruption in the house related government departments and some of the bad laws scared not only the foreign investors but also even the local investors shifted their interest from housing sector to other safe but lucrative areas? Such as investment in dollars and other foreign currencies where no documentation is required they can sell and purchase at the time of their choice. If we have to roll again the wheel of industry, it is imperative to create investment climate in the housing and construction related agencies to attract the local investors in this important sector, which can be rightly described as the mother industries.