Poor infrastructure averting growth of this sector


Dec 15 - 21, 2003




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.