Promoting economic activity


Aug 30 - Sep 05, 2004





The Housing and Construction Industry, which is being eyed as the engine of economic growth by the present government, has not yet yielded the desired results despite overwhelmingly support by the National Housing Policy 2001.

The objective of the national housing policy was to activate the construction industry to achieve certain targets including activate more 80 industries allied to the construction and housing sector, create job opportunities for skilled and unskilled workforce and speed up the pace of development in the country.

The policy of the government massively supported by the financial sector had the potential to click and produce the desired results, yet the usual lack of coordination among the relevant departments and ineffective follow up which is the conventional characteristic of the society creating obstacles restraining it to take a kick start.

It is interesting to note that the banking sector which has opened its doors for the housing sector pumped in over two hundred billion rupees in the housing finance in 2003-04 which is a record itself, but by and large the activity in this sector has been confined to the up country. According to the zonal chief of a leading private bank, the prices in the real estate sector have jumped four times as compared to real estate prices in Karachi.

This is an interesting development as Lahore and Islamabad have left Karachi much behind in terms of activity in the construction sector. When asked to comment on the situation, Babar Mirza Chughtai, Chairman of Association of Builders and Developers (ABAD) said that it is unfortunate that construction industry has been rendered almost paralyzed in Sindh particularly in Karachi by imposing an embargo on the construction activity as a vast land has been declared as frozen by the provincial government some three years ago. The ban on the frozen land had its own implications especially in the form of mushroom growth in slums and katchi abadis in the urban centers of Sindh.

If you look seriously into the matter, you will find that a large chunk of electricity, water, gas and other civic facilities are being grabbed by these katchi abadis depriving the legally organized localities of their civic rights. You just take the example of electricity, the KESC is offering electricity connections at the cheapest rates to these illegal dwellers and consumers while it is denying the access of the organized sector to the electricity by asking exorbitant price for electricity connections. Consequently, a large number of housing projects are lying deserted for want of electricity for over three to four years in Karachi. What is the logic behind offering electricity connections at subsidized rates to the illegal consumers and the decision makers must now demanding huge price from the legally organized consumers.



Despite a single digit mark up offered by the entire banking and the financial sector for house financing scheme, the housing and construction industry was unable to respond desirably due to the constraints which have blocked its way to take off in the real sense.

Interestingly, the activity in the housing and construction sector was more briskly taking place in the up country as compared to Karachi, which has always the center of economic activity in the past.

Despite the fact that the financial sector under the policy of the government has come out with easy access to the housing finance at an affordable markup rate, yet no major project financing has taken place all over the country.

Babar Mirza Chughtai while commenting on the situation pointed out certain areas which need immediate attention of the people at the helm of affairs to give a kick start to this highly labor intensive industry which as a matter of fact has been rendered into an state of stagnation despite the desire of the government to use it as a driving force for economic growth in Pakistan.

Highlighting the issues confronted to the construction industry Babar Mirza said that on one hand the federal government has generously offered incentives to the allied industries like cement and steel by reducing duty and taxes while liberalization of the financial sector to provide fuel to generate economic activity.

It is, however, unfortunate that lands which provide basis for all sort of activity in the housing and construction industry has been frozen for over three and half years ago. Consequently no transaction, registration, sale and purchase, construction is taking place in the areas where the lands have been frozen. The decision to freeze lands allotted by the chief ministers of the previous government was taken in view that the lands were allotted on political considerations below the market prices.

Actually, the land allotted by the previous chief ministers to different people was no more possessed by the original allottees. Such lands have been sold out many times and were purchased by the individuals and the builders at the current market prices.

Since no new housing project is being launched on the frozen lands, the industry has come to a standstill and this state of inactivity entailing serious economic repercussion to the economy and causing unemployment at a massive scale.

Due to prevailing state of inactivity in the housing and construction sector, over 30 percent of the capital especially from Housing and Construction industry has been moved out of Pakistan as the builders and the developers are more interested in launching commercially viable Shopping Centers and Housing projects in Dubai, United Kingdom and the United States.

Most of the commercial and the housing projects currently coming up on the ground and being sold like hot cakes in Dubai are being raised by Pakistani builders. In fact, it was the complexity of the system, lack of coordination between various government departments, conditions of seeking NOCs, freezing of land and a culture of non-compliance to the good economic policies and decisions altogether forcing the active players in the construction industry to relocate in a business-friendly environment.

While admitting the fact that under the policy of making the construction and the housing industry as the engine of economic growth, the present government had come out with a package of attractive incentives besides opening the doors of the banking and the financial sector for the first time at a massive scale, yet the usual culture of non-compliance to the decisions proved as a major irritant in the way of the construction industry to take off and to deliver accordingly.

Despite sufficient water available, more than 13000 tankers have been allowed to supply water at exorbitant price instead of supply the same through the pipeline network. You cannot do away with the tanker mafia culture because this lucrative business enjoy the support of highly influential people who are receiving their share out of this illegal business, he remarked.

Although, the condition of seeking NOCs from various utility services like electricity, gas, and water etc were abolished, yet the decision was still waiting for implementation as the committee formed to look into the matter was sitting on the problem instead of resolving the issue.


Similarly, Sindh government in early 2000 had frozen all the pieces of lands allotted in the province during the year 1985 to 1997 by various chief ministers of Sindh by exercising their discretionary powers conferred to them by the Constitution.

The core of the issue is that the lands under reference were purchased by builders and developers and common people of Sindh as well, during the period 1985 to 1997 on payment of market prices in good faith from original allottees and further paid all taxes, dues and levies etc, contemplating that these lands hold good titles for construction purposes. In the year 2001 by virtue of an Ordinance 2001 called cancellation of allotments, conversions and exchange III-2001, the government of Sindh had started the exercise of de-freeze of these lands on payment of "Malkano" i.e. price differential between allotment and market prevailing of the time of allotments. And constitute a committee under the chairmanship of Justice (R) Syed Abdul Rehman to oversee the whole process and de-freeze the lands. Although the cabinet meeting of Sindh government had given go ahead signal to start process of the de-freezing exercise and directed the committee to de-freeze all the frozen lands on payment of differential.

However, the matter was still lingering on one pretext or the other. Consequently, the construction industry has become paralyzed and the inactivity in the sector compelling the builders towards other venues. Actually, if the penalties were justified on the allotted lands, the authorities that were responsible to allot the government land and the allotees should have been penalized not the buyers who had paid the price at the market rate.

Consequently, over 30 percent of the builders have relocated their business to other countries while some 20 percent have switched over to other business interest.

Another adverse social and economic impact of the ban on construction activity on the frozen lands was emerging in the established localities where the people are converting old housing units from 400 sq. yards to 1000 and on ward into multi-storied apartments. A large number of such housing units have been converted into flat sites, which would have their serious repercussions on the existing localities. For example, the sewerage lines were designed in accordance to the need of a single housing unit, similarly power load and water supply was given accordingly to cater to the need of a single housing unit. But now instead of a single family, that plot has been converted into an apartment were 10-12 families are now housed. Due to ban on construction on the frozen land, such conversion is taking place rapidly within the city, which turned into a civic and social chaos sooner or later, ABAD Chairman warned. The existing infrastructure in the existing localities was not sufficed to accommodate such conversion at a massive scale.


Another problem, which is lying unresolved over the years, was the regularization of buildings in Karachi, which is not taking any shape, and the matter was lingering on for unknown reasons.



Since the government has declared housing sector as an industry, the composition rates for regularization of commercial and marketed buildings should be at par with the rate offered to the industrial areas in Karachi.

Referring to the 7-point Agenda of President Gen. Pervez Musharraf, he said that this agenda for our crisis-ridden nation has made many strides ahead to steer the country out of the inherited mess. The President had reaffirmed in the meeting with the industry people held on April 15, 2004 that the full impact of the 7-point agenda should remain a dream unfulfilled if a crucial sector of national economy that is construction and housing was left in present doldrums.

It is really disgusting that despite being recognized at the highest level, the construction industry has been rendered almost paralyzed and chained in the bureaucratic system at different stages of the Federal, Provincial, District and City government circles.

It is the high time that the government to take practical measures to resolve the issue if it was really serious to accelerate economic activities through the highly labor intensive construction industry in Pakistan.