We can provide better planning, new buildings, schools, and playgrounds for slum areas: Chairman, Association of Builders and Developers

Muhammad Hanif Gohar is a veteran real estate developer and an outspoken member of the country's business community. He is also current Vice Chairman of the Federation of Chambers of Commerce and Industry. BR Research discussed real estate development, affordable housing, taxation and government policies.

<B>BR Research: Tell us about your career in context of real estate development in the country.</B>

<B>Muhammad Hanif Gohar:</B> I started work in 1988. In 2000, I became a member of ABAD and started my own project Gohar Pride in Gulistan-e-Johar. At that time, the construction industry was in a bad shape. Post 9/11 though, the industry underwent a boom.

From there, I launched a new project every three to six months - all commercial. My construction projects are scattered around the city including locations like Tariq Road, Khalid bin Walid Road, Pakistan Chowk, FB Area, Shaheed-e-Millat and Shah Faisal Colony. In pipeline, there are 2,000 bungalows under-construction in Malir named Gohar Green City over 64 acres. Similarly, there is a farmhouse project in Gadap that is being built, and apartments and shops in Model Colony.

Throughout my career, I have made it a point not to compromise on my brand name. We have learnt from the mistakes of other builders who provided sub-par quality and have perished from the market. I believe that if you work with honesty in the real estate/property industry, it is the most profitable sector. And our country has a lot of potential. In Karachi, if there is a favourable tilt in law and order situation, property prices have a lot of room to move upwards. Lately, we have seen prices rise steeply in the city.

<B>BRR: There has remained a persistent gap between housing demand and its supply. Is the pickup in supply enough to narrow this gap?</B>

<B>HG:</B> Housing demand goes up by around 500,000 each year. It is the government's job to facilitate low-cost housing, but it has failed to deliver. In the last 25 years, there hasn't been any successful government scheme. The authorities like LDA and KDA haven't delivered. Shah Latif Town was promised around 25 years back and it hasn't been completely delivered to date.

<B>BRR: ABAD is in court with Sindh Revenue Board over the imposition of general sales tax on services.</B>

<B>HG:</B> We are fighting a legal battle with the Sindh Revenue Board. We have been taxed by authorities as a service provider which we are not. The builders are purchasing land and putting in money out of our own pockets for the development. We believe they have mistakenly added this sector to service providers when in reality we are not a sector that is service providers.

<B>BRR: As the sole real estate representative, how has ABAD's association been with the provincial government?</B>

<B>HG:</B> After agriculture, the construction industry is the second largest employment generator in the country, and it employs both skilled and unskilled workers. In our commitment to offer support to the government as an association, we have presented comprehensive plans regarding low-cost housing and also, about how to bring down the cost of housing. ABAD has presented specific plans recently through which low-cost housing; priced at Rs8 lakh can be made available and this can really help prospective home owners among the middle-income segment. As part of our proposal, half of this amount would have to be paid by the home buyers over a period of four years to the builders; while the other half is to be paid to House Building Finance Corporation. Beyond our resolve with HBFC, we need the support of federal and provincial governments to play their roles to facilitate common people.

Most of the law and order crisis stems from slum areas. We requested the President of the Cantonment Board to allow us to rehabilitate certain slum areas. We want to provide buildings, schools, and playgrounds in slum areas in a phased manner. We have proposed completing one phase at a time; along with temporary relocation of people, and then onwards to the next phase. These proposals have all been provided to relevant authorities however, there is not any progress beyond meetings thus far.

<B>BRR: In your view, what is the best course of action to bring up the recorded value of land to its market value and increase the tax net?</B>

<B>HG:</B> Regarding this, our proposal has been to reduce the taxation rate. The nine percent tax rate should be brought down in a way that the amount of tax collected remains the same by way of higher property valuations. In conjunction, we can introduce a law similar to one in India; it entails that if someone under-declares the value of his property, the government can purchase by paying 25 percent premium above the declared price.

If such a law is introduced, people will abstain from valuing their properties downwards. For instance, if there is a residential space which costs Rs100 million but is declared at only being worth Rs10 million, the government could repossess the land for Rs12.5 million. Such repossessed properties are auctioned off, so the marketplace brings transparency to the process.

To enhance the tax net, we have also proposed to charge a fixed tax from the builders, higher than what we have been paying over the past three-four years. To do this, properties can be categorized into different tranches depending on the time-horizon (of NOC for sale) or the land area. It will result in a win-win; the government will collect more taxes and we will be protected against the harassment of bureaucracy.

For the residential sector, we have proposed a zonal structure to enhance the tax net. The city can be distributed into three zones each having different tax rates. We have provided a full working model to Mr. Haroon Akhtar - advisor to PM on revenue - who has appreciated our efforts and is willing to bring a positive change.