Despite a positive housing and construction policy
offering attractive incentives including availability of a variety of
financial schemes for housing and construction this important sector has
failed to respond to the government policies.
The government, in order to use the construction
industry as an engine for growth of the economy, had announced a
soft-term policy which allows wide range of loaning facilities both by
the public as well as the commercial banks in the private sector; the
construction industry has failed to take off in the country.
It is, however, surprising that although the prices
of the real estate and properties have taken a quantum jump all over the
country especially in Karachi and Lahore, yet a very little movement is
seen in acquiring loan for big construction projects from the banking
system in the country.
Besides the loan facilities offered by the public
sector organization i.e. House Building Finance Corporation (HBFC),
housing finance facility is being extended by around 15 local and
foreign commercial banks for housing construction, purchase, renovation
and repair loans to the tune of Rs.75 lakh for a period of 20 years with
easy lending rate to the level of 7-9 per cent, yet the turn out of the
loan seekers is almost insignificant so far.
A leading figure in the housing and construction
industry while giving his expert opinion on the prevailing situation
said that in fact that there is a complete lack of coordination among
different government agencies and each of them instead of facilitating
the construction industry to make the policy announced by the government
a real success are more interested to assert their own existence and
serving their own interests.
The government on its part had evolved fundamental
changes in the regulatory environment to encourage housing finance in
the country. To encourage investment in this sector, taxes incentives,
easy terms in debt equity ratio, enhanced period of repayment of loans,
increase in lending limits and reduction in lending rates etc. were the
salient features of the policy. The government in the last budget had
also allowed housing finance on easy terms to the government employees.
Yet no visible improvement has been made so far in this sector except
shooting up of prices of the real estate, properties.
Karachi which is the industrial and commercial hub of
the country still has great potential to generate economic activity in
the housing and construction industry, but the hopeless situation in the
infrastructure sector such as unreliable supply of electricity, poor
mechanism of water supply, frequently freezing and de-freezing of lands
in various zones of the city are enough to scare away the investors.
The acute shortage of drinking water in most of the
city areas and unaffordable electricity price are said to be the two
major reasons for stalling growth of small and medium size housing
projects in Karachi. Like other industrial sectors where investment
trend is almost non-existent mainly due to high oil and electricity
prices, poor infrastructure facilities and a team of tax collecting
agencies are enough to discourage the investors.
The regulatory authorities on the other hand have
their own view about the development of the city. Generally speaking,
construction of high rise buildings has been discouraged by the
authorities in Pakistan. The reasons for discouraging construction of
high rise structures are said to be non-existence of infrastructure
suffice to accommodate the sky scrappers, such as sewerage, roads,
electricity and water supplies. The experts in the financial sector
however say that unless high-rise projects are allowed in large cities,
the goal for enhanced role of the financial sector in the construction
may be hard to achieve. Take the example of any big city of the world,
high rises are allowed at prime lands to take maximum benefits of the
location as the high rise buildings also beautify the modern towns.
Contrary to this international policy, the people at the helm of affairs
always create hurdles in the way of development of the city on one
ground or the other. It is unfortunate that political considerations,
per gains and a culture of red-tape and self-created prestige points
present an ugly look when one see inside the system. Another source in
the construction industry said that so far the private sector as well as
the government has focused the urban areas for development. There is a
great potential for growth of the housing accompanied by the financial
sector in the rural areas of the country. There is a need to target the
areas which are rich in agriculture for extending housing facilities. In
fact, almost 6 million new housing units are required in the country,
which shows the level of investment required in the construction
industry. Since the requirement of new housing unit is not met
accordingly, the gap is growing with each passing year. The gap is
generally filled with the mushroom growth of katchi abadi in the major
cities where people influx in search of earning their living. The growth
of these illegal hutments could only be stopped with these people were
given shelter at an affordable price.