Only 17 projects launched in 1HFY11
February 18, 2011
Construction industry has been in doldrums since last year as only 17 projects have been launched in first half of the current fiscal year 1HFY11.
Stakeholders while talking to scribe have expressed concerns over the lagging situation of the industry and seem in a fix over the decision of the government to cut allocation of Public Sector Development Programme (PSDP) further by Rs 100 billion saying it will create more hurdles in the way of already sagging construction industry.
They said that the government has been reducing allocations for PSDP that which is not suitable for the industry, as the housing backlog has reached 8.8 million units in the country.
In a move to reduce its expenditure, the government has decided to further reduce allocations for the PSDP for the remaining five months of the current fiscal year because of financial constraints and a commitment to international donors to maintain the budget deficit within ‘manageable’ limits.
They said that the actual allocation amount for PSDP for FY2010-11 was Rs 450 billion with multiple cuts by the government now the final figure has come to Rs 180 billion.
Chairman of Federation of Pakistan Chamber of Commerce and Industry Standing Committee on Urban Development Muneer Sultan said that this another cut in PSDP is surely going to hit the already struggling housing and construction industry.
He said that a major cause of mounting pressure on housing in urban areas is the rural-urban migration. “World Bank statistics had reported a backlog of 8.8 million housing units against the backlog of 6.1 million in 2005,” he informed.
He said that as per WB report Pakistan might face further housing backlog of 10 million units in the next 20 years beside the backlog of 8.8 million, if the construction industry is neglected continuously.
It has been estimated that more than half of all housing units in Pakistan consist of only one room, shared by an average family at 6.5 people.
On the other hand, a related phenomenon is the mushrooming of slums (kutchi abadis) whose number rose from 471 in 1984 to 1,472 in 2008, he said. In all major cities, other problems include an increase in the crime rate and the large-scale power and water theft in slums through illegal connections.
Muneer further informed that the government had taken some initiatives in the concerned sector, which unfortunately failed with no results.
He added that the potential to generate employment in this sector has not been taken seriously in the past, nor ever decided to revitalize it as a vehicle for economic revival.
He further said that the last government had been sincere to develop the industry but bureaucracy prevented the growth of construction sector that would have directly benefited 72 allied industries.
“All over the world, the housing and construction sector contributes greatly to national GDP but in Pakistan, the government fails to recognise the sector’s importance which would eventually have dire consequences in the future,” he concluded.
He said that a committee has been constituted with representation of government officials including FPCCI representatives to discuss issues relating to Reformed General Sales Tax (RGST) and this cut in PSDP.
After lapse of 6 months that devastating floods jolted the country, the construction activities in most of the flood affected areas are in pending or either have not been started yet.
It is estimated that the country has a backlog of around 8.8 million housing units, which is increasing by the year due to inadequate spending on housing sector. The major factor causing this backlog is the unavailability of financing means with the lower income segment of the country. The financing available through banks is expensive and not many of the banks are keen in developing long-term house loan market.
He also urged the government not to make cuts in the PSDP for diverting it to cope with floods. He further said that the move could affect growth of business and industry, which have been already suffering due to insufficient development of infrastructure.
He was of the view the government should work out other viable options to mobilise funds for flood relief, rehabilitation and reconstructions activities. Steps like adopting prudent financial management and ensuring strict observance of financial discipline could also help in avoiding wasteful expenditures and sparing funds for the restoration of flood-hit people.
Babar Mirza Chughtai, Chairman Association of Builders and Developers said “we are in a fix over the announcement of cut as nothing is cleared yet that from which head of PSDP the cut would be done.”
He was of the view that situation of the industry is not appreciating as only 17 housing projects have been launched in the city during last six months of FY2010-11.