Builders and developers are upbeat about the pace of development in Punjab and Khyber Pakhtunkhwa under the Naya Pakistan Housing Programme (NPHP). However, they are worried about the slow pace of development in Sindh.

The government had announced a relief package of Rs100 billion for the construction sector in April, which was to be followed by the building of five million houses under the NPHP. Builders were bound to register their projects on the Federal Board of Revenue (FBR) portal called Iris by Dec 31 and complete the grey structure by Sept 22.

Giving an overall picture of the registration of projects on the FBR portal, Association of Builders and Developers (ABAD) Chairman Fayyaz Ilyas claimed that more than 300 projects have been registered with NPHP and under the special package for the construction industry.

“We are expecting that by Dec 31, this number will be more than 500. This will lead to more than Rs600 billion investment,” he said.

Builders and developers are facing problems in getting approval for building plans in Sindh due to various reasons. However, work in other parts of the country, especially Punjab and Khyber Pakhtunkhwa, has begun.

‘This is the first time in the history of Pakistan that a government has taken the right steps to deal with the housing problems,’ says ABAD Chairman

The actual problem is the slow bureaucratic way of work as well as vested interest. But the federal government is working hard for the revival of construction activities with the help of the private sector. Giving an example, he said the vice chairman of the Lahore Development Authority (LDA) has been appointed from the private sector. Now the LDA is approving projects within 45 days, he said.

Mr Ilyas said Punjab and Khyber Pakhtunkhwa have changed their draconian laws. So builders and developers are getting approvals easily. In Sindh, builders are facing problems and the federal government could do little to remove bottlenecks after the 18th Amendment.

In Balochistan, Gwadar is the main city for construction activities. The provincial government has established the Gwadar Development Authority, which is working well, he claimed.

ABAD has pledged projects worth Rs1.37 trillion to boost the construction industry and other economic activities. “We are waiting for approvals of building plans in Sindh, especially in Karachi where housing demand is rising with the population increase.”

More than 300 projects of ABAD members in Sindh are in the pipeline. “Once these projects are approved, you will see investment of more than Rs600bn,” he said.

Housing projects have been launched when the cost of living has gone up rapidly. However, builders are excited about the good response from the general public.

“We have seen enormous response, especially from those people who are living in low-rated, rental houses because they will be able to pay back their loans easily,” the ABAD chief said. All commercial banks are bound to set aside 5pc of their total portfolios for housing loans. “This is the first time in the history of Pakistan that a government has taken the right steps for housing,” he said.

As for financing and guarantees from banks, he said there is no need to worry about such issues. “That’s because the Naya Pakistan Housing and Development Authority (Naphda) is guaranteeing the approval of loans from banks. All commercial banks, on the instruction of the State Bank of Pakistan (SBP), have modified their home financing criteria for general housing loans. So I think financing is no longer a big issue,” he added.

When asked about the impression that project registration on the FBR’s Iris portal suggests that builders do not hold credibility in the eyes of the government and consumers, Mr Ilyas answered in the negative. “No, this is a wrong impression. If the government had no confidence in us, the construction sector would have never received such a big package. Registration with Iris is necessary for tax purposes,” he said.

The government has announced a fixed tax regime (FTR) for all projects and 90pc tax relief for NPHP. “We are happy that a government department is there to look after the tax matters and this taxation system is transparent.”

“A majority of builders and developers are businessmen who want to complete their projects and hand over the possession of housing units to their clients as soon as possible,” the ABAD chairman said.

In the construction package, owners of five- and 10-marla residential plots will receive subsidised house building loans while people constructing, buying or selling their first houses are exempted from several taxes and duties.

The per-month mortgage instalment ranges from Rs16,000 to Rs28,000 for three-marla, one to four bedrooms’ units with the household monthly income ranging from Rs46,000 to Rs78,000. For a monthly income of Rs60,000-103,000, the monthly instalment hovers between Rs20,000 and Rs34,000 for five-marla, one to four bedrooms’ units under NPHP.

When asked whether these incentives and per-month instalments will work amid the rising cost of living, Mr Ilyas said although the cost of living has gone up, one still has to pay their rent and spend money on utilities and grocery every month. The government has brought instalments under the NPHP down to a level that any person currently paying rent can afford a housing loan.

He said all high-rise projects are not hi-end projects. So the middle-class and lower-middle-class people are also able to afford property in such projects. No doubt, a handsome amount of remittances is also invested in real estate.

“I think the upper class will not be able to take advantage of this scheme because Naphda has installed a fool-proof checking system. Only the deserving people will be able to get houses via this scheme.”

Under the construction package, no question builders/developers are not being asked about the source of income. Their tax gets reduced by 90pc if builders/developers take on a project related to low-cost housing under the NPHP. He said builders and developers will get benefits from this package, but their margins will be very low.

“First of all, builders and developers will be able to bring their money into the tax net and work without the fear of the FBR. They will be paying taxes according to approved plans as 90pc tax reduction is for the NPHS,” he said.

The ABAD chief said this construction package is for those builders and developers who are doing legal business. All builders and developers will be documented, which was a longstanding demand of ABAD. “ABAD gives membership to those builders who are doing legal business and for that we are scrutinising thoroughly before awarding memberships,” he said, urging all approving authorities and regulators to make ABAD’s membership mandatory for participating developers.

Pakistan is facing a shortage of 12m houses. Annual demand is estimated at 0.4m houses. Private builders and developers are constructing 0.15m units a year, which means a shortfall of 0.25m houses annually.

As for soaring steel bar and cement prices, he said ABAD has asked the federal government to tame steel and cement cartels, which arbitrarily raise prices of their products frequently. Steel bars and cement constitute more than 50pc share in a project’s cost.

Published in Dawn, The Business and Finance Weekly, December 28th, 2020