Too many cooks spoiling the broth



July 05 - 11, 2004





Contrary to the policies of the federal government to make the Housing and Construction industry as the engine for economic growth, which have started producing positive results, the incompatible decisions taken at the provincial and district level seem to mar the entire efforts, especially in Sindh.

It was due to government's encouraging decisions and incentives to this sector besides a much needed relief to the HBFC borrowers supported by the entire banking system which has opened its doors with innovative house financing products which are no doubt giving a booming effect to the Housing and Construction industry in Pakistan.

The banking system both in the public and the private sector has come at a massive scale to boost the highly important sector of Housing and the Construction in Pakistan.

National Bank of Pakistan (NBP) has introduced a product to facilitate financing for low cost housing scheme namely "SAIBAN" especially for the federal, provincial and city government employees at an affordable price.

The NBP in collaboration with Association of Builders and Development (ABAD) the representative body of builders and developers in Pakistan has jointly taken the above step on the desire of the Federal Finance Minister Shaukat Aziz for uplifting the construction and housing industry and to provide shelter to the homeless people.

According to Aamir Siddiqui, Executive Vice President NBP, the Saiban scheme was specially tailored for low-income employees of the Federal and the Provincial governments and City District government. This step will not only create immediate employment opportunities on massive scale, but will also enhance economic activities in a large number of industries like cement, iron and steel glass, paints, wooden work, marble and ceramic tiles, sanitary industry, electrical accessories and a large number of related industrial units.

As majority of the employees are receiving low salaries less than ten thousand rupees per month and national bank has pledged to target such low paid employees. According to an estimate, there are more than 4 million such employees all over the country, which make a sizeable market for the low cost housing schemes.

Similarly, PICIC in the private sector has launched housing finance scheme "Apnay Ghar Ka Khawab" for this project, PICIC has earmarked a fund of rupees one billion for a period of 6 months of the current year. PICIC has already disbursed over one billion rupees under its housing finance scheme since April 2003.

Similarly, almost all the commercial banks have introduced their own house financing products for segments of the society which speaks the all out efforts of the federal government to mobilize the financial sector to lend a big hand to make the housing and construction industry a great success to achieve the desired economic goals.

Karachi, which always has been a haven for investment in the real estate sector, has responded exceptionally as the transaction in the real estate had taken a tremendous jump, which reflects the pace of growth in over 80 industries allied to the housing and construction sector.

Unfortunately, the pace of growth has been stalled before it takes off by the decision of the Sindh government making it mandatory for the consumers to obtain a No Objection Certification (NOC) from the Karachi Building Control Authority. The condition of obtaining NOC has been imposed across the board, whether it's a new or old project, irrespective a developer or any individual develops it, whether it's a constructed house or flat or an open plot. The NOC would obviously issued to those who have completed all relevant or irrelevant formalities, thus opening the doors of corruption in this sector. This requires completion certificate of a house or project, utilization of land fee whether this plot is lying in the far-flung areas where no development has been made by the responsible authorities. Another step taken at the city government level especially in Gulshan-e-Iqbal and Gulistan-e-Jauhar areas to pay 1.2 percent tax on any transaction, the sale or transfers of an open plot or constructed house. All these steps at the provincial and district level have severally affected the pace of growth in this sector and almost the booming activity has come to a standstill.

On the other hand, the federal government had made additional measures to improve the profitability of investment in the housing and construction sector. These include elimination of excise duty on paints, reduction in the duties on a number of building materials, including steel, cutback in the duty on imported machinery together with exemption from sales tax and withholding income tax.



To remove uncertainties of legal titles from the real estate markets, all records of building authorities and societies would be computerized and public disclosure would be made of the ownership of properties so that consumers could enter into real estate transaction without fear of misrepresentation and fraud. In contradiction to the spirit of the policies of the federal government irritants at the provincial level are feared to destroy the entire efforts to generate economic activity in the housing and construction industry.

The provincial government has enforced the condition of the NOC following a court decision in respect of violation of building rules in the construction of a housing project exceeding the number of flats to the approved plan by a developer. Though the decision was came obviously with a good intention to save the customers from possible frauds, uncertainty and hardships while entering into a property deal. However, the Revenue Board of Sindh perhaps without taking into account the future complexities in real estate transaction had imposed the NOC condition across the board in all categories of the real estate transactions, transfers causing a crash like situation in the housing and construction sector. According to informed more than 6 petitions have already been submitted to the court for withdrawal of the mandatory condition of obtaining NOC for prior to registration of any property deal.


The Sindh Board of Revenue has issued a notification to all sub-registrars asking them not to executive any sale or lease deed (except agricultural land) without ensuring that the parties concerned have obtained NOC from the Karachi Building Control Authority (KBCA).

The notification says that the Sindh High Court while hearing C.P Nos.310/2004 and 311/2004 had directed that all sub-registrars be ordered not to executive any sale deed or lease (except for agricultural land) without the required NOC from KBCA.

It is, however, learnt that the sub-registrars deputed in cantonment areas were executing lease, sale deed, mutation, power of attorney and gift deeds without ensuring whether the people seeking such documents had obtained the NOC from the KBCA that had been made mandatory in the wake of the BOR's circular.

For issuing NOC, the KBCA has designed NOC form bearing details of plot and property as well as carrying the photograph of the owner. The form is available for Rs100 at the KBCA office.

Any applicant seeking the NOC for lease, sub-lease, power of attorney and sale deed, transfer can get the same in at least three days for which he will have to pay Rs200. To get NOC in 24 hours, those having a property up to 200sq yards or a 600sq feet flat would have to pay Rs500. Similarly, those having property above 200sq yards or flat measuring more than 600ft flat would have to pay Rs500 and above that size will cost Rs1000 for getting the NOC.

People who had brought flats in the buildings, which had been raised, in violation of approved plans will not be issued NOC required for getting lease, sale deed, mutation or power of attorney.

The owners of such flats were seen strongly protesting over the new rules and said that in fact the violations in raising flats or other buildings cannot be carried out without connivance of the KBCA officials, hence they should be penalized or punished and not the innocent buyers. It is true that whenever the construction work starts even at a small plot not only the KBCA, or former KDA, and a host of other agencies including policemen reach their asking for papers and if they found paper correct they ask for Mithai (sweet) for start of a new building. There were hundreds of such flat apartments where the builders obviously in connivance of the relevant departments and their corrupt staff had committed gross violation of building rules.

There are a number of housing projects where contrary to the approved plan shops were constructed and sold out where were the relevant authorities while all these illegal activity was going on, said an affected consumer.




Instead of making things more complicated by levying taxes, levies and bad laws which there are certain areas which need immediate attention of the government for rules and regulations.

Among such areas where strong regulations are required include the business real estate or property brokers. The estate agencies or property agents have erupted all over the country in an epidemic form. These real estate brokers are found in every street and corner. Since there is no legal or financial requirement for initiating a real estate business every Tom and Harry becomes a real estate agent overnight without having knowledge about the property rules, transfers, registration or other procedures. Since most of such brokers are ignorant about the legal requirements, how these people could save the consumers or the buyers or the sellers of the property from being cheated by unscrupulous elements who are out to defraud people of their hard earned money.

In the developed world, no one can become a real estate broker unless he gone through a diploma in real estate brokerage, registered his entity as a estate broker with the government, have a certain amount of fund in his bank account and pay the tax on his earnings through real estate business.

Contrary to the highly desirable situation of the developed countries, it looks like a free for all situations in Pakistan where they are operating without fear or any rules and regulations or any legal consequences in case of any fraud in the transaction of the property.

The brokers are charging a fee at the rate of 2 percent from both the parties without paying any money to the government exchequer. Why the authorities have neglected these highly sensitive areas. In fact these are the areas which need a close watch through rules and regulations instead of creating hurdles by asking NOCs or other bureaucratic hurdles in the growth of highly labor oriented sector of the economy.

There is a large breed of real estate agents operating all over the country with out any registration, approval or other requirements needed for carry on the sensitive real estate business.

I personally know the background of a tragic story where one of the brokers managed to win the confidence of a government school teacher to deprive him the hard earned pension, provident fund and gratuity on the pretext of selling a cheaper house on false documents in North Karachi.

In that particular case the victim was convinced to get early retirement and buy the house because the said school teacher could build a house from the salary which was even not suffice to cater to the family with essential and basic needs. Consequently, he lost his job, all the money and the house as the genuine owners of the house approached the court for recovery of their house, which sold, by such a broker on false documents.


The incentives announced in the budget include 5 percent reduction on import of specified machinery not manufactured locally to encourage investment in the Housing and Construction sector.

Paints and varnishes and other essential items in this sector. It is proposed to abolish 10 percent central excise duty on paints and varnishes. The facility of tax credit was provided through Finance Act 2001 to any profit paid to a schedule bank or NBFC for housing scheme regulated by the SECP, on a loan or advance by government or the local authority, where such loan is utilized for the construction of a house.

This facility is not available to private sector employees who obtain loan for the same purpose from their employers. It is proposed to extend this facility to employees of statutory bodies and public limited companies listed on stock exchange as well. The government intends to create at least one million new jobs mainly through generating economic activity in the Housing and Construction industry.