An indicator of strong economic growth


May 10 - 16, 2004





The real estate business which had almost came to a standstill three years ago when most of the developers and other concerns had pulled down their shutters due to lack of interest of the investors in the real estate business.

However, with the revival of the economy, the real estate and the construction industry once again has come back on the track which should be taken as an indicator reflecting the state of the economy which is on the strides in Pakistan.

People who matter in the real estate and the construction business say that the rise and fall in real estate is associated with the rise and fall of the economy. It is the last sector to succumb to the depressing economic pressures while it is the first one to pick up as soon as the economy starts growing.

Although the real estate and the construction industry has started showing signs of improvement which is reflected in the growing demand and upward trend in prices, yet this sector was still the victim of the bureaucratic chains impeding the desired level of growth in this sector.


In fact, besides a large segment of the local investors, the non-resident Pakistanis are keen to invest their home remittances in the real estate sector as it the safest haven for risk-free investment, which pays back handsome. The trend of investment by non-resident Pakistanis has accelerated the demand which naturally pushes up the prices. However, the increase in steel and cement prices has also helped property prices to increase. According to an assessment, the land prices in posh areas like Defense Housing Society, Clifton, PECHS, Gulshan-e-Iqbal, Gulistan-e-Jauhar, and North Nazimabad have registered an increase ranging from 70 percent to 50 percent.

Though the prices have not taken a jump in low lying areas yet an upward trend is visible in the low income group areas as well which is not a good sign from different angles. Actually, to keep land prices at affordable level is a prerequisite to check over the menace of slums (Katchi abadis) which not only disturb the supply of essential services like electricity, gas and water but also contribute in aggravating the crime rate in the society.

People living in a decent environment think thousand times prior to indulge or commit a crime as against those who live in slums have a little on stake to care for. Hence providing decent living conditions greatly helps to eradicate anti-social activities from the society.



Actually, the housing sector in Pakistan offers great opportunities for investors in view of the growing demand for new housing units and a huge backlog of over 6 million houses required for the shelter less in the country.

The banking system in the country has come in a big way to offer house financing, yet the housing and the construction sector could not produced the results as have been shown by the automobile sector which the banking system is providing car financing facilities.

During the current financial year, while the auto sector has registered an impressive 68 percent growth, the housing sector has yet to gear up. Spelling out the reasons for comparatively low growth in housing sector, a senior builder said that contrary to the spirit of the housing scheme launched by the government, a large number of plots allotted in the past on political considerations were freezed to restrict all sort of construction activities. This ban seriously affected the construction activity especially in the urban areas of Sindh. The extremely complex system of getting No Objection Certificates from utility organizations dealing in electricity, gas prior to launching any housing and other construction project was again a major hurdle. Now the government under the directives of President Pervez Musharraf has done away with the NOC conditions for the builders while construction activity on the frozen land is also expected to be allowed soon.

The only area which needs immediate attention of the government is the complicated procedure for allowing housing loans especially to the low income group. As against the car financing scheme, those seeking house building or purchase loans have to obtain NOCs from a dozen government departments. There is an immediate need that one-window facility should be provided to the people seeking loans for housing. It is highly important that low income group should be allowed access to banking system in the real sense. This would also contribute significantly in meeting the targets of the poverty reduction program so far visible in the headlines of the newspapers alone.

During the current financial year, the economy is poised to hit an impressive 6 percent growth in the real GDP. No doubt, it is a commendable performance, acknowledged internationally; however, it is still lagging behind the actual depth of the economy.

The construction industry can do a magic by multiplying the GDP growth provided a helping out culture is developed especially in the banking system instead of discouraging people through intricacies of highly complicated procedures. The construction activity on one hand activate over 80 allied industries, while create economic activity ever after completion of the building when inmates of the new housing unit adorn it with the large number of household items essentially required in a newly built house.