Industry woes: Sector remains under construction
By Shahram Haq
Published: April 3, 2014
Government initiating low-cost projects to help bridge the gap. CREATIVE COMMONS
LAHORE: Despite a growing demand for new housing units, the construction industry of the country continues to underperform — primarily due to a lack of attention on part of the government. Coupled with a hike in real estate prices, it has become increasingly hard for the middle and lower strata of society to afford a decent housing unit.
Urbanisation is the pumping fuel to this soaring price mechanism. In Punjab, people from rural areas are now swiftly migrating to megacities like Lahore, Rawalpindi, Multan and Faisalabad.
The level of immigration in Lahore has recently reached its peak and it is becoming nearly impossible for low-income groups to find rental property in the city. This, along with the level of investments in the real estate sector, has pushed property prices up.
With increasing land prices, the cost of building materials used in construction consequently resulted in an increase in the price of new housing units.
Pakistan needs around 1 million new housing units per year but only 0.35 million units are being constructed per annum currently.
Majority of these units are being constructed by leading developers for the upper-class with excellent facilities and state-of-the-art infrastructure. These go beyond the range for the less privileged class who cannot purchase them even on installments.
About 80% of the total annual demand consists of low-cost housing units which a majority of developers are hesitant to construct due to lower profits.
To overcome the deficiency, the current government has announced to construct 0.5 million low cost housing units. The Punjab government is finally starting a 10,000-unit ‘Ashiana-e-Iqbal’ housing society in Lahore with public-private partnership, providing some relief to contractors.
Ashiana schemes in Multan, Faisalabad, Sargodha and Sahiwal are also in the pipeline. Contractors believe this will help the crumbling construction industry and also slow down migration.
“We are participating with the Punjab government to design a transparent and competitive process for the awarding the Ashiana projects’ contract to competent builders”, said Association of Builders and Developers (ABAD) Regional Chairman Akbar Sheikh.
ABAD believes that public-private partnerships in these government schemes will help boost construction activities along with providing a boom to numerous aligned industries.
It is expected that Ashiana projects will increase the GDP by one percent.
Once the momentum begins, more and more private developers will begin to provide citizens with affordable housing units in cities across the country.
The construction industry contributes about 2.3% to the GDP and ABAD believes that this would increase to about 5% once the underlying issues of the industry, especially taxation, are resolved.
“We have already started a dialog with government officials and departments to discuss and overcome some major issues which the construction industry of Pakistan is currently facing,” concluded Sheikh.
Published in The Express Tribune, April 3rd, 2014.