ABAD to build its own low-cost housing societies in Karachi, Lahore and Islamabad

KARACHI: Association of Builders and Developers of Pakistan (ABAD) has decided to launch low-cost housing projects in Karachi, Lahore and Islamabad through which it plans to provide small houses to low and middle-class people.

According to a report of the State Bank of Pakistan (SBP), the yearly estimated housing demand is 400,000 units while the actual supply is only 150,000, leaving a shortfall of 250,000. If we calculate from the last 10 years, there could be a shortage of 2.5 million units in the country.

“Looking at the housing demand in Pakistan, ABAD had decided last year to launch low-cost housing projects in Karachi, Lahore and Islamabad aimed at the low and middle-class people,” said ABAD Chairman Arif Jeewa.

“The cost of the houses will range from Rs 1,500,000 to Rs 2,000,000 and ABAD has already identified 400-500 acres of land in Islamabad for the project. After signing purchase deals, we will initiate our first housing project very soon. More than 50,000 applications have been received so far against the announcement of 5,000 units in Islamabad only,” he informed.

The chairman further complained about the non-cooperative attitude shown by the provincial and federal governments. “No government was ready to give us land for these projects. We conducted several meetings with the prime minister and chief ministers of the provinces but all disappointed us," he said.

ABAD Patron-in-Chief Mohsin Sheikhani also complained about the government’s attitude. "The government is not ready to assist the builders working in the country, therefore we have decided to purchase land and start our own projects in Karachi, Lahore and Islamabad,” he stated.

ABAD has requested the federal government to make a special board through which affordable housing projects can be provided with a one window facility so that they can initiate their projects, he added.

“The housing sector is playing a major role in economic growth and stabilisation through the creation of jobs in construction sector and demand for financial services. The housing and construction industry has the potential of absorbing a large number of skilled and unskilled workforce, significantly mitigating unemployment and thereby reducing poverty in the country,” he commented.

“After 20 to 30 years, the government housing projects like Taiser Town, Surjani Town are still waiting for the development of road infrastructure, sewerage system and other facilities,” said Aqeel Kareem Dhedi, a leading broker and builder in Pakistan.  Private housing schemes complete their projects in three to four years with all basic facilities, he added.

Impact of Supreme Court verdict

After Supreme Court (SC) intervention in the Sindh Building Control Authority (SBCA) in May 2017, the prices of commercial land in Karachi have declined as the SC verdict has discouraged builders from building high-rise buildings on small plots.

The builders had allegedly built 12 to 16 story buildings on 400 to 500 square meters plots after giving huge bribes to SBCA.  In this connection, former SBCA chief Manzoor Kaka and others have been dismissed from their posts.

The apex court allowed the builders to construct only six-story buildings in Karachi and warned that the prescribed limit should not be breached.

According to a rough estimate, construction on almost 400 plans with a total investment of Rs 900 billion for high-rise buildings in Karachi is waiting approval of the Sindh government.

No credit facilities or housing loans

In Pakistan, there is no credit facility for the urban poor in the formal banking structure. Credit is essentially tied to collateral, which excludes all those who do not possess any land.

Those who are providing loans to the urban poor are demanding almost double or triple interest on the long-term loans. All the emphasis lies on house construction loans. Loans of small amounts are not granted by financial institutions and others banking channels.

“The SBP has taken initiative for low-cost housing and directed banks to make plans for financing to the low and middle-class people,” Mohsin Sheikhani said.

It may be encouraged to venture into new avenues such as community mortgage programmes, housing credit assistance to public and corporate organisation employees, support to bankable housing projects in the private sector and options of drawing funds from the public through permissible financial channels.

According to the market analysts, there is a need to take stock of the research work done in these respects and examine their suitability and relevance to housing demands in various contexts.

International Journal of Science, ‘Basic and Applied research

According to a report of International Journal of Science, ‘Basic and Applied Research (IJSBAR-2015 Volume 24),’ “Pakistan is facing the challenge of urbanisation and inadequate housing due to an exodus of population from rural to urban areas since the 1960s. Of the total population of almost 201 million, in the year being reported, the urban population in Pakistan constitutes about 36.2 per cent, and is increasing at a rate of 2.6 per cent per year.” “This process of rapid urbanisation, the report claimed, has resulted in overcrowding of cities and deterioration of the environment.

It further said that the massive backlog vis-à-vis the need for housing is speedily multiplying the problems of the people who are at loss to understand as to how and when will this problem be resolved.

Prime Minister assures ABAD for reducing taxes:

Prime Minister Shahid Khaqan Abbasi in a recent statement has assured the members of ABAD that federal taxes on the transfer of properties will be reduced and brought to a rational level.

After imposing a federal tax on the transfer of properties, issues like double taxation have increased all over the country, he added.

“The builders and developers are still purchasing land for their projects, but they do not register these properties on their name only to avoid any further tax,” said a builder requesting for anonymity. He said they make the plot owners partner in the deal.

The Prime Minister assured ABAD of providing all the basic facilities including water, gas and electricity for the ABAD Social Housing Schemes in Islamabad, Karachi and other cities of the country besides also reducing federal taxes on the transfer of properties.

In an apparent move to inject new life in the property market before the general elections, the federal government slashed property valuation rates by up to 57 per cent for certain localities of Karachi, Lahore, Islamabad, Rawalpindi, Peshawar and Faisalabad.

However, now, instead of increasing the rates for collection of federal withholding and capital gains tax, property valuations have been pushed down for certain localities of six major cities.

Builders, developers and real estate dealers believe the downward-revised FBR valuations were a huge blow to the sector and it may take time before the sector can stand on its feet again. The stakeholders want the government to reduce the percentage of 12 per cent taxes (including 3 per cent federal and about 9 per cent provincial levies).

“We want the government to gradually reduce the combined 12 per cent taxes to help improve investor sentiment,” ABAD chairman said.

Perturbed with the slowdown in the property market, it seems that the government wants to provide some sort of incentive to investors, the chairman ABAD said.