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Construction activities have accelerated in the country with real estate prices too g - Salman - 06-05-2014 01:38 PM
Construction activities have accelerated in the country with real estate prices too going up.
While Karachi and Islamabad are witnessing uneven growth, Lahore is enjoying moderate rise.
Likewise, well-established builders busy in constructing high rise flats dominate the construction projects in Islamabad and Karachi, while Lahore is in the grip of developers who are developing residential plots instead of doing any construction work, said Akber Shiekh, the chairman of Association of Builders and Developers (Abad).
He said the previous actions against high rise buildings in Lahore have discouraged builders. Scores of high rise buildings were demolished on court orders from 2011-2013 for violation of building rules.
Shiekh said building rules are violated in Karachi as well, but the regularization is done after imposing penalties.
It doesn’t mean that violation of rules could be ignored. If someone fails to obtain approval for construction despite that his construction adheres to safety and norms, he may be penalized rather than entire structure is demolished.
This action made a number of builders to start developing residential plots, he said.
The Abad chairman said now there are more developed plots in Lahore than the demand, which has kept the prices suppressed.
Logically, he added, the real estate prices should have been highest in Lahore because of its location as a main gateway to trade with India.
However, construction activities are on rise in the country that is evident from 7.2 percent higher uptake of cement, said Abad chief.
He said Punjab has particularly benefited from the development programme of the provincial government.
Besides launching motorways and metro bus project, the low cost Ashiana housing scheme of Punjab has contributed to higher construction activities. Moreover, he added, industrial construction in Punjab is also boosting the construction sector.
Low cost housing activities are mostly limited to Punjab government’s Ashiana initiates. Abad members are set to start work on 10,000 low cost houses in Lahore alone, Shiekh said.
A builder Khalid Rehman said that there was a great demand in Punjab for residences that cost less than five million rupees.
He said builders in Karachi provide such residences in the shape of flats and apartments even on installments as the House Building Finance Corporation is quite liberal in sanctioning loans for high-rises in Karachi. Yet, the exposure of HBFC in Lahore is nominal, he regretted. Bank finance, he added, is also not available for housing projects or is very expensive.
The builder said the HBFC is a national institution committed to serve all the parts of the country and it should increase its allocation for construction projects in Lahore.
Pakistan needs 300,000 new houses every year, while we construct only 100,000, he said, adding, “We are adding a backlog of 200,000 houses every year.”
He said there is no shortage of large houses on 500 square yards or above as the affluent sections of the society construct according to its needs.
However, said Rehman, lower segment of the society cannot afford to buy a developed plot of even 125 square yards and then construct a house. They could afford a flat at reasonable installments based on the same concept as adopted in Ashiana scheme. For this, he added, the builders need financing, which currently is not available.
Another builder Wasay Athar Shiekh said the government should facilitate construction activities as it gets 25 percent revenue on the gross cost of construction from documented builders.
The builder said even from the undocumented builders the revenue collection stands at 15 percent as the cement, paint, sanitary, electrical appliances and steel they buy is subject to 17 percent sales tax and account for 85 percent of the construction cost.
Presently, the country spends $20 billion on construction activities, which is roughly eight percent of the country’s gross domestic product. Abad experts estimated the potential of construction activities at 15 percent of GDP.
Currently, said Shiekh, 40 percent of the total share of construction work is spent on infrastructure projects, 30 percent on commercial projects and 30 percent on housing. He said activities in each of these sectors could be doubled with little efforts. An interest rate subsidy could boost construction without practically impacting government funds.
“What the government would lose on interest subsidy would be recovered in the form of higher taxes,” he concluded. The News