Will Pakistani real estate contractors buy into the e-commerce rage?

In the wake of the Covid-19 pandemic, one of the sectors on which the incumbent government has seemed to lay great emphasis is construction. It was one of the first industries to be given leave to operate as it was, it was given a large relief package worth Rs 100 billion in April last year, and in many cases rightly so. 

The construction industry provides hundreds of thousands of jobs to the most vulnerable sectors of society and is a major contributor to the economy. This is something that the Imran Khan led Pakistan Tehreek-e-Insaaf (PTI) government seems to understand well. After agriculture, which was affected less so by the ongoing pandemic, construction is the second largest sector in the economy. The local construction material industry generates revenues of more than US$30 billion per annum, which is growing at an exceptional rate of 12%. The construction industry in Pakistan is in fact one of the major employers in the country and comes with a lot of allied industries. 

The construction industry has contributed as much as 3 percent to the country’s GDP in the last five years, according to Pakistan’s Economic Survey 2019-20, which valued its contribution at Rs 316 billion. In addition to this direct contribution, a large number of economists and experts say that the sector’s real value lies somewhere between 10 to 12 percent of the total GDP because of the more than 42 ancillary sectors including cement, cables, bricks, aluminium, fixtures, glass, kitchen and bathroom fittings, tiles, steel, marble, paint, transport, warehousing and wood, which have a far reaching impact on the economy as whole. 

So whether it is the ambitious Naya Pakistan Housing Scheme, many projects of the China-Pakistan Economic Corridor (CPEC), or other construction projects like Ravi Riverfront Urban Development Project – the government has been trying to do all it can to boost the construction industry. Of course, as with everything, a boost in available work and money is not enough in a fast changing world. The construction industry in Pakistan needs innovation, and part of that could be through initiatives like Zarea.pk, which is a digital startup that provides an online platform for the construction industry to solve some of its problems.  

What is the package? 

Before understanding what it is that platforms like Zarea.pk do exactly, it is important to figure out what exactly the government has already done for the construction industry in the wake of the Covid-19 pandemic. On April 3, 2020, Prime Minister Imran Khan announced a relief package that included tax exemptions for the construction sector.

After attending the meeting of the National Command and Control Centre, the premier told the media that his government provided these exemptions to secure employment for the labourers so that they are least affected by the upcoming difficult circumstances because of the pandemic related lockdown across the country. The PM said that in line with the relief package, the government will not ask construction entities about their source of income for this year as well as approval of a fixed tax regime for the sector.

It was evident from the construction sector package announcement that the objectives were two fold: The first was to play a part in bridging the affordable housing gap through the Naya Pakistan Housing Program (NPHP) that was started in April last year with the ultimate aim of providing and building five million houses in five years for the masses. The second objective was to kickstart the economy by creating employment for the masses. 

To implement and achieve these goals, the government also started the National Committee on Housing Construction and Development (NCHCD) in July last year. The committee’s ultimate aims include monitoring the construction sector and ensuring that any hurdles that arise are taken care of, and that in the long run, construction activities continue to increase at a rapid pace. 

The Prime Minister’s construction package was well received by builders, developers, and property owners alike – something that was reflected in business activity. We have the example of cement sales, which in December 2020, grew by more than 11% to stand at 4.8 million tonnes. Overall, the extension of the construction amnesty package will revive trust in the sector and continue to bolster growth in the sector. Although, it may carry adverse implications in the long run due to Pakistan’s commitments given to Financial Action Task Force (FATF) and International Monetary Fund (IMF).

The results of the package

If the government had decided to go for a complete lockdown, as it should probably have done, the construction industry would have seen a slump similar to retail. However, since the injection of the stimulus package, it has instead seen an increase in innovation and demand. In fact, we witnessed a mushroom growth of digital platforms which are providing building materials to the consumers like Tameerghar.com, Ebuildpakistan.com and daraz.pk also keeps some building materials and has been approaching paint and cement companies. Cement manufacturers like Bestway cement have already started selling online on their website while Pioneer cement is selling through Daraz.pk.One such startup that is trying to take advantage of the situation is Zarea.pk, which is Pakistan’s first and largest online marketplace for construction as claimed by the company.

Zarea.pk is the brainchild of Ali Alam Qamar, Management major from SOAS, at the University of London. He also specialised in Sustainable Finance & Investments at Harvard University and has successfully completed a diploma on Tax Policy at the London School of Economics. Ali is the Director at Flying Group of Industries, which has ventures in cement, paper, packaging, tissues and the energy sector in Pakistan. His role as Executive Director at Flying Cement, which is one of the top manufacturers of cement in Pakistan, and his active involvement in construction projects led him to identify the gaps in the construction industry and capitalise on his rich exposure to launch Zarea.pk with a vision to serve as a one stop shop for construction. 

Speaking to Profit, Ali Alam Qamar, who is also the founder and the Chief Executive Officer of the company, said that the main concept behind Zarea.pk is to provide a one click solution for purchase of construction and finishing materials.  The vision behind this digital platform is to add value to the process of construction all across Pakistan by simplifying the process, providing cost effective solutions, empowering our customers by minimising information asymmetry, creating awareness and moving one step closer to the dream of a Digital Pakistan.

He claims that the company is setting new standards in the construction and finishing material purchase process by providing the most competitive rates in the market, the top quality brands, express delivery to your doorstep, multiple payment options and a dedicated customer support team. “We also intend to assist our customers in the purchase process by providing access to talk to an industry expert via their helpline, purchasing guides, blogs, our featured architects and builders and material calculators to ascertain the quality and quantity of the products required,” he said. 

What problems is Zarea.pk tackling? 

The platform makes sense of course. There is no doubt that a one stop shop for construction over an app or website will make life much easier for a lot of contractors, or even people looking to do construction in their homes at a personal level. However, there are certain key problems that have been identified by Qamar and his team that Zarea.pk hopes to leverage to become vital to Pakistan’s construction industry. 

For example, currently, there is no single platform for the purchase of materials. For the purchase of each construction material – bricks, crush, cement, steel, sand etc – one has to go to different vendors. 

Other than this, prices are regularly inflated and non-standardised due to lack of transparency, and a form of monopoly is maintained by middlemen in the market. Various shopkeepers/vendors offer different prices for the same products and overcharge their customers which leads to price discrimination and non-standardisation of prices. There are also serious quality issues because of these same middlemen, and because of a lack of innovation, there are problems with timely delivery. And since most vendors operate through sole proprietorships, or do not register their company with local authorities to evade taxations and other laws, they only provide cash on delivery options. This has the potential to lead to mismanagement of payment, hassle in halding huge amounts of cash and no money trail.

Zarea.pk has identified these main problems and provides systematic solutions to each of these problems. “Zarea.pk is a one stop shop for the purchase of all construction materials. For the first time in Pakistan you can survey and purchase all construction materials at a single platform eliminating the need to go physically to multiple stores,” Qamar tells us. “Currently, our products are also up to 20% off market price thanks to our partnerships with top manufacturers of construction and finishing materials to directly provide the most cost effective solutions for their customers.” 

Of course, this is partly temporary and the 20% figure will not always be true. However, one big bonus is that Zarea.pk allows customers to be aware, educated, and well informed about the products they are buying. They provide buying guides, material cost calculators, 24/7 talk to expert options through their helpline, and blogs to assist the construction process. “We also have the fastest delivery to your doorstep through our integrated transportation network, for which we have partnered with top transporters to ensure timely delivery at the most competitive rates in the market,” claims Qamar.  

“With us, you also have the benefit of complete quality assurance. Our highly skilled team of civil engineers and technicians ensure that the materials delivered are upto the certified standards, and in case of non-satisfaction, Zarea.pk offers a dedicated customer support team through its helpline to resolve customer queries and complaints along with a 72 hour refund policy,” explains the CEO. “We have also partnered with Bank Alfalah to provide easy and convenient payment solutions for our customers. Along with providing cash on delivery options, for the first time in Pakistan, Zarea.pk has enabled purchase of construction materials through Credit/Debit cards, Alfa Wallet and Online Bank Transfer so our customers can enjoy a hassle free experience and exclusive offers on purchase from credit/debit cards.” 

Vision for the future

As with any startup, Qamar’s dreams for it are big. The construction sector is the second largest sector of the economy and generates more than $30 billion per annum, which is growing at around 12 percent per annum. But somehow, it has shied away from online platforms staking their claim in this. With aggressive marketing strategies, efficient supply chain networks, and presence all over Pakistan, Zarea.pk has hopes to see itself taking a major chunk of this market segment within 5 years. 

“I hope to see Zarea.pk adding value to the process of construction by becoming a trusted partner from the very second one thinks of construction. In the coming years, we’ll strive for horizontal and vertical integration. I wish to see Zarea.pk on the forefront of spreading and manifesting the vision for a digital Pakistan,” said Qamar, explaining his hopes for the future of the company. “Even after the pandemic is over, there is going to be utility for this service. Pakistan has a population of more than 230 million people, out of which 169 Million people have cellular subscriptions and 85 Million people have 3G/4G subscriptions and this is growing at a compounded rate of more than 10% per annum. Therefore, the majority of decision makers involved in construction have access to internet subscriptions, allowing us to capitalise on this reach.” 

“I think digitalisation in Pakistan is here to stay, and given the clear advantages of using this platform compared to brick and mortar stores, even after the pandemic is over we will have ingrained its footsteps in the construction industry having digitally transformed the process of construction.” 

It is heartening to see that a digital platform for construction materials is making a way for itself in the arena of growing housing and construction activity, and it might attract other business ventures to follow in their footsteps. The prime minister has already said that in Punjab, the approval process is underway for Rs 136 billion worth of construction projects. With these projects, in the province, economic activity worth Rs1500 billion can be expected to generate 250,000 jobs.

With all of this going on, and the timely release of development funds from the Public Sector, initiatives like Zarea.pk can truly make a place for themselves. They can even be used to form new public and private sector alliances to facilitate construction across Pakistan, adding value to the economy and bolstering foreign investment into the construction sector in Pakistan through digitalisation and simplification of the process of construction.