Facilitate housing sector: government urged to ask banks, DFIs to extend loans at low mark-up

Association of Builders and Developers (Abad) has urged the government to motivate commercial banks and Development Finance Institutions (DFIs) to extend loans to housing sectors at subsidised rates to expedite construction activities across the country. Speaking at a pre-budget meeting held at Abad house here, Mohsin Sheikhani, chairman, Abad said that association in its budget proposals 2014-15 suggested the government to take initiative for broadening of tax base instead of increasing tax rate to achieve revenue target.
He said that government had assured Abad to provide gas connections for new projects, however, after the lapse of several months, the government did not allocate gas connections to 10000 apartments in the city. "ABAD through its budget proposals stressed upon the government to take stern measures to maintain peace in the city, besides ensuring the availability of utilities for its projects with tax incentives," Mohsin said.
He said the authorities should pay attention to evolve long-term policy to revive the industry. To a question, he said that government's low cost housing policy was a huge project and Abad in order to attract more investors proposed to give tax incentives to the builders to materialise the project.
"However, Secretary Finance and chairman FBR are reluctant to give tax exemptions to the builders; they suggested Prime Minister Mian Nawaz Sharif to give builders and developers special incentives but not give tax exemption to Abad members," he added. Head of economy revival committee and Senior Vice chairman Abad, Saleem Kassim Patel, while giving detailed briefing on Abad proposals said the construction industry in Pakistan was not provided any incentive by the government. "There is a shortage of roughly eight millions housing units and it increases 0.2 million per annum," he said, adding if concrete measures were not taken, the shortage of houses would escalate to 125 million by 2025.
Moreover, he said that annual growth of Karachi was 2.5 percent that created a demand of 50,000 housing units per annum. Patel further said that government should order banks and DFIs to extend loans to housing sectors at subsidised rates to expedite construction activities across the country and added that State Bank of Pakistan (SBP) should put a minimum cap of 5 percent for banks for housing finance. At present, House Building Finance Company has virtually stopped the loaning process that put many housing projects, which are in various stages of completion, in an uncertain situation, he said. Therefore, Abad suggested the government to encourage financial institutions to give mortgage loans for construction of houses at a little below market rates. He said that housing refinance window should be set up at the SBP for long term funds from multinational agencies and added that mark-up on housing loan instalment for individuals should be treated as expense in tax returns.
"In order to promote low cost housing schemes for the low income segment of society, Abad recommends the government to provide housing finance at subsidised rate of mark-up." He further said that stamp duties and registration fee should be reduced to one percent and government should not charge the same on housing mortgage.