Housing and Construction
- Pakistan is the 5th most populous country in the world, with 220 million citizens, more than 60 million strong labor force and a growing middle class.
- Out of total population, 36.38% resides in urban areas whereas 63.62 lives in rural parts.
- There is a growing demand for houses due to a 2.4% annual population growth rate as per census 2017.
- The country’s construction industry accounts for 2.53% of Gross Domestic Product (GDP) according to the Pakistan Economic Survey. The sector employs 7.61% of the employed Pakistani labour force.
- GFCF in private sector grew by 20.6% between FY2019 and FY2020. Private sector GFCF amounted over 95% of the total.
- China Pakistan Economic Corridor (CPEC) has given a boost to the construction sector through the influx of infrastructural projects including highways, power plants, and dams.
- Pakistan is the 5th most populous country in the world
- Total population, 36.38% resides in urban areas whereas 63.62 lives in rural
- GFCF in private sector grew by 20.6% between FY2019 and FY2020
- China Pakistan Economic Corridor (CPEC) has given a boost to the construction sector
REASONS TO INVEST
- Pakistan’s construction sector provides up to 380 billion PKR in GDP.
- According to the Association of Builders and Developers, pending cases pertaining to construction and housing add up to Rs. 1.1 trillion in monetary value.
- Fitch Solution projects an industry value of Rs.2,705.5 billion by 2028 representing the potential of the housing and construction industry.
- Construction sector has been declared an industry. With this brings tax relief to firms in the industry through the amendments to the tax ordinance. Reforms to tax policies provide numerous incentives to builders and developers as well as contractors. These include lower tax rates and the removal of numerous taxes previously hampering the ease of doing business in the sector.
- Pakistan’s north region has an installed cement capacity of 53,722,500 tpa.
- Pakistan’s south region has an installed cement capacity of 16,834,600 tpa.
- CPEC and infrastructure projects have increased the demand for steel.
- Pakistan is 28th in steel production as stated in a Pakistan Business Council Report.
- Pakistan ranks at 22nd position worldwide for 263,775 Km length of its road network.
- First ever National Transport Policy has been approved by GoP in Feb. 2019.
Despite decreases in Gross Domestic Product (GDP), public sector spending on infrastructure, and Foreign Direct Investment (FDI), the outlook remains positive due to unprecedented reforms carried out by the government through restructuring, improvement in regulatory environment and introduction of incentives and relief packages.
Incentives offered by the Government
Construction Sector Granted Status of Industry
The Income Tax Ordinance has been amended to declare construction sector as an industrial undertaking, making it eligible for benefits and concession available to other industries.
New Fixed Tax Regime from Tax Year 2020 and Onwards for Eligible Builders and Developers
An optional ‘Fixed tax regime’ from tax year 2020 and onwards for eligible builders and developers has been introduced on the income, derived from the sale of buildings or sale of plots, from a new or an incomplete existing project. Prior to this, tax was levied on a net income basis. Rate and computation of liability is determined under rule 10 of the eleventh schedule
Exemption of Withholding Tax on Purchase of Building Materials
Eligible Developers and Builders shall be exempted from withholding taxes on purchase of building materials. Dividend income paid to a person by a builder or Developer Company out of the profits and gains derived from a project shall be exempt from tax and also from tax withholding obligations.
Exemption of Capital Gains Tax
Capital gains received by an individual on the sale of residential property (personal/family) house or flat, have been exempted from income tax.
Banks to increase credit for financing the housing & construction sector
With a view to promote housing and construction of buildings (Residential and Non-Residential) in Pakistan, State Bank of Pakistan (SBP) has decided to advise mandatory targets to the banks. Accordingly, each bank shall ensure that the financing for housing and construction of buildings (Residential and Non-Residential) shall be at least 5% of their domestic private sector credit by December, 2021.