pakistan_construction_industry

For the year 2021 – Is Pakistan’s construction industry on the right path?

Agriculture existing as the main backbone of Pakistan economy on the other side we can evidently witness the expansion rate of construction industry and how it’s making the place in country’s economy. When the backbone of a country expands, the rise is exponential and a symbol of growing economy.

After the deadly outbreak and sudden lockdown, the country’s government has alleviated the loss by upgrading the policies in budget 2020-2021 while the rest got covered in the finance bill. The response towards the construction industry and by the construction industry was immensely welcoming and positive as the given policies have sounded promising. Few of the key points representing the policies are stated below reflecting how the economic status of construction industries in Pakistan is getting on the right track for the year 2021.

  1. Construction of new projects can be done irrespective of source investment disclosures.
  2. Secure income tax rate
  3. The inventory purchase will lead to a relax from withholding tax for eligible builders and developers
  4. Liberations for Cement Industry
  5. Lowered markup rates
  1. Construction of new projects can be done irrespective of source investment disclosures

The Modification:

According to Income Tax Ordinance 2001, the change of policy allowed zero disclosure of source investments for the construction of commercial/residential areas or first purchase of latest construction schemes. 

The Result:

  • –Construction industry became the right choice of investment.
  • –Feasibility of business performances
  • –Reduction of unemployment rates via birth of new job roles
  • -Elimination of lengthy money trial and background checks process, increasing the ease of project constructions.
  • Secure Income Tax Rate

The Modification:

  • –Stating the Construction Package 2020; surplus to cement or steel holders will have a reduction of 10% tax whereas dividend paid to shareholders of Construction Company / industry will be relaxed with 90% tax to those investors who put their financial assets on Naya Pakistan Housing program construction projects.
  • A secure tax regime will be introduced for builders and developers irrespective of the profit ratio under the incentive scheme for the construction region.
  • A revised taxation system where builders and developers of urban cities will have to pay tax of Rs250 per square feet on units sold in residential or commercial area.

The Result:

  • –Greater number of investors due to positive tax regime for investment in housing schemes.
  • –Secure sense of investment created for the investors by the country’s government, leading a step ahead for successful launch of housing schemes with incentives.
  • –Lesser tax paying increasing the profitability status for builders and developers
  • –Sustainable nourishment of construction industry
  • The inventory purchase will lead to a relax from withholding tax for eligible builders and developers

The Modification:

Eligible builders will be relaxed from withholding taxes under section 153 of Income tax ordinance 2001 while steel and cement manufactures possessing exemption certificate under the similar law will also be entertained with same policy.

The Result:

With the ease of business in construction industry it has prominently reduced the construction cost for builders and developers

  • Liberation for Cement Industry

The Modification:

According to the Finance Bill 2020 following policies were introduced;

  • Cost reduction in Federal excise duty on cement from Rs 2/kg to Rs 1.75/kg.
  • FBR has implemented a tax relief from Rs20bn to Rs13bn under the section of sales and income tax.

The Result:

  • Cement prices got reduced
  • Rapid booster for country’s construction industries

5. Lowered Markup Rates for Housing

The Modification:

  • Rs30bn aid for Naya Pakistan Housing Project
  • An aid of Rs300,000 will be provided on the establishment of first 100,000 houses.
  • Citizens will be offered with subsidized interest rate options after taking house-buying loans from banks with allowance of 5% house financing, obeying the law from Development Authority Bill 2019.

The Result:

  • Investment upgrade and expected peak in the construction industry
  • Lower construction prices will increase the construction of large scale projects
  • Growth in steel and cement demand

Taking under observation the current budget and policies made for construction industry of Pakistan will definitely result favorable for all, builders, investors and citizens. Since Pakistan comes under the list of under-developing countries, it won’t be a lie to quote majority of the population comes under the division of middle class or lower middle class.

With the decreased taxes, relief of financing, cheap inventory purchases and government aid policies, an effort towards the deduction of the ratio of homeless and unemployed people within the country has been made by the government.  The core result of induced polices will certainly mitigate the housing needs of middle class people for owning a home at cheaper rates.

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