CONSTRUCTION INDUSTRY EMERGING AS MAJOR SECTOR FOR FOREIGN INVESTORS
The real estate industry's new face is rapidly catching up with the changes in the technological domain.
SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Apr 09 - 15, 2007
Construction industry — housing, hotels and infrastructure - is emerging as one of the major sectors attracting foreign investors. After Karachi and Lahore, the capital Islamabad is emerging as a major hub of construction activity. Owing to major infrastructure projects initiated by the Capital Development Authority and housing and hotel projects launched by the Ministry of Housing and Works, major international companies of UAE and Saudi Arabia besides Pakistani construction companies have come to the country while many others have shown their interest for investment. New road are being constructed, existing ones are being expanded, besides improved and capacity-enhanced flyovers, underpasses and new bridges are being constructed. With a vastly improved and stable investment climate, a number of foreign investors are now exploring new ventures in Pakistan and expanding the already existing ones.
Headed by the Prime Minister, the Board of Investment since its inception in 1994 has been playing an active role in facilitating foreign as well as expatriate Pakistanis to invest in Pakistan. The real impetus for investment came with the improvements in investment policies and various initiatives taken by the present government to make Pakistan an investor-friendly country. Pakistan has been ranked among top 10 reformer countries in the world, according to recent World Bank report. Pakistan is at 60th position in terms of ease of doing business in a survey of 155 countries conducted by International Finance Corporation (IFC). The flow of foreign investment in Pakistan is likely to touch $ 6 billion in 2006-07 as against $ 300 million in the year 2000.
Although Pakistan is open to investment in any sector, the six major sectors identified as the most potent and ripe areas for investment are:
i) Power generation
ii) Oil and Gas Exploration and Development
v) Hotels, and
The construction sector continued its strong showing, partly helped by activity in private housing market, spending on physical infrastructure, and reconstruction activities in earthquake-affected areas. The construction sector is estimated to grow by approximately 9 percent during the current fiscal year. Foreign investment in large-scale real estate ventures helps Pakistani building material manufacturers to boost scales and improve profitability, thus contributing to GDP growth as a whole.
The real estate industry's new face is rapidly catching up with the changes in the technological domain or in other words Pakistan's real estate industry is trying to catch up. Foreign investment in real estate development is very productive as it generates jobs and feed numerous individuals. Over the years real estate portals multiplied in this era and many more are in the pipeline while the operating ones have earned the customer's confidence.
PAK GULF CONSTRUCTION (PVT) LIMITED
Pak Gulf Construction (Pvt) Limited is the flagship joint venture of Sardar Group of Pakistan and AI-Tamimi Group of Saudi Arabia. The project commonly known as "The Centaurus is designed by world acclaimed architect firm M/s A.S. Atkins, and is being built at the confluence of G-8/F-8 sectors over land measuring 6.6 acres, harnessing full potential of Pakistan's hospitability and real estate market.
The project includes a 30-storied, 350 bedroom world class hotel topped by a panoramic restaurant capturing the view of the city and its skyline; a 600,000 square feet shopping mall; 350,000 square feet offices and more than 300 apartments. The basement of the building will have space for parking 1800 cars.
Emaar Properties, the leading property developer, announced three real estate development projects in Islamabad and Karachi. The projects, with a total investment of AED 8.8 billion (US$2.4 billion), will include a series of master planned communities that will set new benchmarks in commercial, residential and retail property in Pakistan.
CRESCENT BAY KARACHI
Crescent Bay Karachi is a mixed commercial and residential project spread over an area of 75 acres. It is situated in DHA Phase-VIII in close proximity of the DHA Golf Club and being developed as a part of US $ 2.4 billion dollars investment by the UAE property giant Emaar PJSC. The towers will contain nearly 4000 residential flats, a shopping center and a five-star beachfront hotel.
DIAMOND BAR ISLAND CITY
Diamond Bar Island City is another ambitious project of the Emaar Properties of Dubai. It is being developed on two islands near Port Qasim Karachi with an estimated outlay of US $ 43 billion. Under this project Emaar will construct homes and apartments at Bundal and Buddo islands, which are spread over an area of 12,000 acres. This project will be completed over a period of 13 years whereby the island will be linked to the DHA Phase-VIII through a bridge at a cost of US $ 50 million.
SUGAR LAND CITY KARACHI
This is another ambitious and futuristic development project planned at the Hawksbay, Karachi. It is spread over an area of 60,000 acres and shall be developed by a Dubai world affiliate Limitless. The development envisages shopping malls, plazas, apartments, town houses, beaches, resorts and hotels, etc. Phase-I of the project will involve investment of US $ 20 billion over the period of next 10 years and 2,000 hectares of waterfront property and other phases are expected to attract much lager investments.
AL-GHURAIR GIGA GROUP
President Musharraf recently inaugurated the largest concrete batching plant in Pakistan, which has a capacity of producing 120 cubic meters per hour or 20 trucks in an hour. The plant has been set up at an estimated cost of US $ 15 million by Malaysian IJM Company.
INSHAA HOLDINGS OF SHARJAH, UAE
Inshaa Holdings has planned to invest $ 200 million in Karachi where the company has bought 13,000 square yards of Pakistan Railways land at a price of Rs. 2.3 billion at I.I. Chundrigar Road Karachi. The land was sold to Inshaa Holdings for the said project on 60:40 share split between Pakistan Railways and NLC. The NLC has already entered into an agreement with Inshaa Holdings for building commercial twin towers on the philosophy of Dubai Financial District.
Various local and foreign companies are involved in the business of construction of hotels, shopping malls, offices, bungalows and apartments to cater to the needs of the people of the country.
A number of policy measures have been taken by the government for the promotion of housing as part of construction industry. Some are as follows.
The provincial and local governments shall identify state and other lands in and around urban and rural settlements for housing projects.
Land availability shall be enlarged through various innovative measures like land banking on continuous basis to cater to at least 5 to 10 years development plan needs. Land Acquisition Laws shall be suitably amended to make provision for unified transparent and market value oriented system and litigation minimization. Federal and provincial funding and assistance shall be available for infrastructure amenities and other developments only in the planned areas.
Land disposal systems shall be developed which are unified transparent and market oriented with open auction policy and exception for special needs.
Provision of trunk infrastructure shall be the responsibility of utility agencies like WAPDA PTCL, SNGPL, SSGCL, KESC, etc. The cost of trunk infrastructure shall not be an additional charge to the public or private housing development schemes within the planned areas. Development of comprehensive Land Information System including inventory and land classification, settlement patterns, land values, land availability, etc, shall be a mandatory requirement. Development of master plans/structural plans/outline development plans shall be mandatory requirement for all urban and rural areas.
The concept of integrated development optimizing land use shall be promoted. De-concentration of metropolitan and major urban centers shall be encouraged.
B) RESOURCE MOBILIZATION
Financial institutions shall be encouraged to give mortgage loans for housing purposes at market rates. All commercial banks shall be encouraged to advance loans for housing and housing projects by earmarking a substantial percentage of their loan portfolio like other industrial and commercial projects. Housing refinance window shall be set up at State Bank of Pakistan for long-term funds from multilateral agencies. Institutions maintaining insurance funds, provident funds, EOBI funds, etc. shall be encouraged to invest a part of their portfolio in the housing and construction sector, including long term housing bonds.
Part of the sale proceeds of valuable public land shall be set aside to provide plots for low income housing and housing for the poor and needy at concessionary rates. Financial institutions and housing financial institutions shall be encouraged to float long-term bonds at market rates to raise housing finance.
Housing finance institution shall be promoted to encourage savings and provide credit from community based finance and other sources.
C) ENHANCED CREDIT FACILITIES
The annual disbursement of HBFC loans shall be enhanced from the present Rs. 1.2 billion to Rs. 7.00 billion over the next 5 years. HBFC and other financial institutions shall formulate packages of preferential and people-friendly economic markup rates with affordable system of installments for repayment to provide affordable credit to low-income groups.
HBFC shall reintroduce bridge financing and bulk financing of housing projects through escrow accounting together with appropriate safeguards.
D) LEGAL AND FINANCIAL FRAMEWORK
The foreclosure laws shall be introduced to ensure effective recovery of loans and advances from the defaulters. Simplification of procedures for land transactions and standardization of mortgage documents will facilitate sale and purchase of housing units.