ISLAMABAD: The government is looking to boost the contribution of construction industry to the GDP by attracting investment, according to WealthPk.
According to the Economic Survey of Pakistan 2020-2021, the construction industry contributes 2.53 percent to the GDP and employs 7.61 percent of labor force.
This sector provides around PKR380 billion in the GDP, WealthPK reported.
The Pakistan Bureau of Statistics (PBS) estimates that the public Gross Fixed Capital Formation (GFCF) in construction grew by 18% in the Financial Year (FY) 2021.
The upsurge was due to a rise in infrastructural development by the Capital Development Authority and Lahore Development Authority.
As per the State Bank of Pakistan, housing and construction financing grew by 84% in FY2021 due to the amnesty scheme and government subsidy, and by September 2021, the outstanding amount to the sector reached PKR305 billion, up from PKR166 billion in September 2020.
The government has allocated PKR34.6 billion for housing and community amenities and PKR26.7 billion for construction and transportation.
The construction sector is expected to grow at 5.1 percent on average between 2022-2025.
The government is offering a lot of incentives to builders and developers like exemption from the Withholding Tax on purchasing a new property. Also, the capital gains received by a person on the sale of a residential building are not included in the income tax. Moreover, on 18th January, the State Bank of Pakistan directed the banks to increase the percentage of financing for housing and construction from 5 percent to 7 percent.
Though the sector is growing rapidly, there are some challenges faced by builders and developers.
The cost of construction increased due to the devaluation of the rupee which made developers vulnerable and caused delays in projects. The prices of cement and steel are also increasing rapidly, becoming a matter of concern for developers and builders.
To make the construction industry more profitable and a consistently growing sector, the government must make long-term policies that include fixed prices of cement and steel and a stable rupee against the dollar.
Moreover, there are also some common issues facing the construction industry like lack of a skilled labor force and advanced technology. The country must address these issues.
There are some technical training institutes in Pakistan, such as the Islamabad Vocational and Technical Institute and Government Technical Training Centre. Such type of institutes must be available in every part of the country so that everyone can learn technical skills. The builders and developers must be incentivized in terms of import subsidies so that they can modernize the industry with advanced technology.
INP
