Construction Industry Package given by The Government

True, the road to success is always under construction. The construction industry is one of the major contributors to the country’s GDP. It plays a vital role in providing employment opportunities.

Statistically speaking, seven per cent of the Pakistani workforce is directly employed in this sector. Moreover, as per the economic survey of Pakistan, the construction industry contributed up to 2.7 per cent of GDP in FY17. It is important to note that, more than seventy other small and large industries are directly associated with it and the housing industry. In short, the industry has good potential to improve the overall wellbeing of economies, particularly developing countries like Pakistan.

Current Condition of Construction Industry in Pakistan and Responsible Factors:

According to the Labor force survey 2018-2019, the total labour force in Pakistan is around 80 million. Despite the presence of ample labour force in the country, the construction industry could not prosper in Pakistan. For instance, the sector witnessed a contraction to 7.6 per cent in FY19 from 8.2 per cent growth during FY18.

Most common factors of this sharp contraction are incompetent contractors, delay in payments to contractors, lack of training and expertise, lack of research and development, corruption, inaccurate project schedule, incompetent project team, lack of cash flows, and the wrong set of policies, to name a few.

Simply put, the industry required immediate attention and up-gradation to play its proper role in Pakistan’s GDP, which now the government of Pakistan has duly accorded. The Government of Pakistan has announced a package for the real estate/construction sector to attract investment and has accorded it the status of an industry now. This is a step in the right direction.

What are the Incentives given to the Construction Industry by the Government of Pakistan?

To improve the sector and increase employment opportunities in Pakistan, the government announced a construction industry package. Following are the main incentives of the package.

  • For the current year, investors of the construction industry, will not be asked about their source of income.
  • A fixed tax will be charged.
  • Those investors who will invest under the umbrella of the Naya Pakistan Housing Scheme will pay only 10 percent tax, and 90 percent fixed tax will be waived off.
  • No retention tax on all associated sectors, except cement and steel.
  • Capital tax will be waived off for a family selling its house.
  • A subsidy of up to thirty billion PKR will be given to Naya Pakistan Housing Scheme.
  • Sales tax will be reduced for the construction industry. Following this incentive, Punjab and KPK governments have agreed to reduce it to up to two percent.
  • To spur the construction industry and formulate policies and remove hurdles, Construction Industry Development Board will be set up.
  • Tax will be reduced in proportioned to the increase in valuation table rate.
  • Capital Gain Tax holding period will be reduced from 4 years to 3 years for constructed property. It is pertinent to note that, CGT holding period for construction plots may remain eight years, but the rate of tax will be reduced from the fourth year onwards.
  • After showing their net worth, investors of the construction industry will be able to take a credit equal to ten times the paid tax.

Socio-Economic Benefits to the country by given Package to Construction Industry

  1. Social Benefits
    • According to an article by Daily Times 2018, more than two-hundred million people live without a home in Pakistan. Therefore, the homeless population in Pakistan will get urgent support by given package.
    • Under this package, efforts are being done to explore that; how support could be provided to the low and middle-income population who is not able to make monthly rental payments.
    • Those people who have lost their jobs due to COVID-19, the government has allocated two-hundred billion PKR to provide them relief under this package.
    • The condition of Informal settlements (Katchi Abadis, Squatter settlements), will be improved which will ultimately lead to improving the quality of life of people living there.
  2. 2. Economic Benefits
    • The construction industry package will lead to re-open huge potential for new investment in the industry that will help to keep rotating the wheel of the economy in the current COVID-19 pandemic situation.
    • Experts pointed out that, these relaxations in the construction industry will not only open up opportunities, however other associated industries will also be activated.
    • According to the views of Vice-Chancellor of Pakistan Institute of Development Economics (PIDE), Dr. Nadeem ul Haque, “tax relaxation in the construction industry will promote market liberalization in this sector and in result new investments will be increased”.
    • Employment opportunities will be open up in the construction industry by these incentives.

5 ways the construction industry can rebuild itself for the 21st century

According to the World Economic Forum, there are 5 golden ways the construction industry can rebuild for the 21st century. Government of Pakistan must follow these ways to replenish the glory of the industry;

  • Continuous learning and career development of every stakeholder involved in the construction industry.
  • Usage of technology and innovation.
  • Create relevant incentives by the government for the investors.
  • Redefine the public image of construction.
  • Collaborate systematically; Public-Private Partnership.

In short, the construction sector is one of the major sources of the socio-economic development of a country. The construction industry can play a vital role in the economic uplift and overall well being of the country. Unfortunately, the construction sector is one of the most neglected sectors in Pakistan. There was a time (2006-2007) when this sector grew by 17.2 percent.

To make it possible again, long term policies, incentives by the government, usage of technology, continuous learning, and public-private partnership must be considered wisely. Hopefully, time is near when this sector will glow again to contribute to the overall wealth of the country. Long Live Pakistan.



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