Government incentives encourage investors to pour money into real estate
By Shahram Haq
Published in The Express Tribune, August 8th, 2020.
The federal government’s decision to incentivise the construction sector has opened avenues for investments in many sectors.
In a bid to encourage private companies to invest in private or government land and construct affordable housing units, the Pakistan Tehreek-e-Insaf (PTI) government adopted a number of measures to facilitate the sector.
The government toned down its taxation ratio for land transfers, which acted as a catalyst for investment sentiment. However, further boost came on back of the measure preventing different departments to ask for source of income from the investors.
Experts said that, since the last one month, land prices in major cities are increasing, especially in those areas where construction is allowed. Apart from this, low interest and saving rates have forced many Pakistanis to pull out money from banks or national savings and put them in real estate markets.
“In one month, land prices of Lahore Defence Housing Authority have increased by 30%, land is changing hands since taxation has been reduced with some other incentives,” Waseem Malik, Chief Executive Officer F-1 Properties, told The Express Tribune.
He said that the combined ratio of CVT and stamp duty, which previously was 5% of DC value, has been reduced to 1%. “This has significantly reduced transfer costs and now money has once again started circulating in the market, which will ultimately have a positive effect on other sub-sectors too in the future,” Malik added.
Following the PTI government’s early days in office, the real estate market was in turmoil as investigations into the source of income created panic among investors and badly impacted the sector. The circulation of money stopped, and a trickledown effect was visible in nearly all other sectors of the economy as money circulation, both black and white, is much larger than any other segment of the economy.
On Friday, Prime Minister Imran Khan inaugurated a project aimed at controlling different civic, environmental and population issues. The premier is looking for private investments especially from overseas Pakistanis in this new project, to facilitate this sector and boost the overall economy of Pakistan.
“Overseas investors now have legal cover to put their money in real estate or construction sector and take back their money with profit at any time,” Association of Builders and Developers Pakistan North Zone Chairman Akbar Sheikh told The Express Tribune.
Previously the procedure was silent, however, recently the State Bank of Pakistan has given its directions in favour of overseas investors in this sector, he added.
“To develop affordable housing projects via private sector, the government should help us develop the required infrastructure for connectivity and other civic issues, rest private sector will take care,” Sheikh added.
“We are already observing positive trends in the construction-led industry in July. Allied production sector figures like cement, cables etc have shown positive trends, which we were not expecting.”