Construction industry, according to latest Economic Survey, has been one of the star performers of the fiscal year 2004-05. As against a downturn of 6.9 % last year, this sector recorded upturn of 6.2 % this year. It is said that the decline last year was mainly caused by a massive global increase in the prices of iron and steel because of the 'China factor'.
Due to population pressure, migration from towns to cities and various measures taken by the government for promoting housing availability, construction activity in Pakistan has been gathering momentum and the demand for construction-related materials has surged.
Many national and international real estate developers have launched site development and / or construction projects in Pakistan. More such projects are in the pipeline.
The housing availability in Pakistan has been deteriorating over the past many years for a variety of reasons, including ineffective policies, resulting in huge housing backlog now projected at 6.0 million units. Annual additional requirement is estimated at around 0.57 million units whereas the annual construction is estimated at around 0.30 million units, resulting in a recurring shortfall of 0.27 million units annually.
In order to address the backlog and meet the housing shortfall in the next 20 years, the overall housing construction has been estimated to increase to 0.82 units annually. The target to fill the gap should not be difficult to achieve if bottlenecks to the housing construction are effectively removed by the authorities.
Apart from promoting "houses for all", the government may consider streamlining the whole process of construction, from one end to the other. Purchase of land with clear title at reasonable price, high rates of various fees payable for different approvals and the formalities for getting the building plans approved are time-consuming and often dishearten the prospective house owners.
Construction activity is expected to get a boost once these problems are tackled satisfactorily.
Construction is the process of building houses, factories, offices, shops, roads, airports, bridges, amusement parks, etc. The construction industry comprises undertakings that manufacture or produce material or things used in construction work as well as the providers of services for readying the construction projects for the intended purposes.
Construction materials include cement, steel, piping, electrical wiring, paints, doors, windows, etc- all things required for constructing different building structures. The small subcontractors, though in large number, have limited cope of work involving a special skill, knowledge, or ability and include specialist service providers, such as plumbers, electricians and concrete workers. Some of these persons may have multiple roles in the construction activities.
The number of establishments ranging in size and specialty is large and easily make the construction industry one of the largest of all industries in any country.
The business establishments in the construction industry interact with businesses in related industries that supply materials, equipment, financing and guarantees or surety bonding of the construction contractor. Each business is dependent on one another for survival and growth. Construction projects are continuously built all over the country in large numbers.
The use of construction materials, particularly cement, bricks, tiles, steel, piping, doors and windows, etc is in large quantities. Construction industry supports over 50 allied industries, including cement, steel, cables, ceramics, glass, marble, stone-crushing, printing and so on.
Similar is the case for abundant job opportunities for unskilled labour as well as skilled persons. The contribution of construction industry to the GDP is enormous and so is its impact on poverty alleviation.
Construction industry is much more than merely the building of houses. Commercial construction projects may include Retail Projects (shopping centers, restaurants, grocery stores, etc), Rental Facilities (office buildings, industrial parks, apartments, etc), Business Locations (company headquarters, manufacturing plants, warehouses, etc), Municipal Buildings (city halls, prisons, schools, hospitals, etc), and Special Projects (amusement parks, race tracks, mosques, etc).
There is need to streamline the whole process and protect the interest of different groups from exploitation particularly the unskilled and skilled labourers working for different stakeholders.
Highway and heavy construction is the high-end of the construction industry. Highway construction may include city streets, freeways, country roads, highway bridges, and tunnels and the specialised equipment used for the purpose includes bulldozers, graders, dump trucks, and rollers.
Heavy construction involves use of large and complex mechanised equipment, such as cranes, bulldozers, pile drivers, dredges, and pipe-laying devices. Projects in this category include dams, large bridges, refineries, petrochemical plants, industrial plants, nuclear and fossil fuel power plants, pipelines, and offshore platforms.
The largest engineering and construction firms are included in the heavy construction classification.
The government has acknowledged in the latest Economic Survey that the strengthening of the country's infrastructure is a basic imperative for sustaining growth momentum. Better road infrastructure is associated with greater agricultural output, higher income, better indicators of access to health services, and greater wage income opportunities.
The development of rural infrastructure has important implication for the alleviation of poverty. The municipal infrastructure contributes most in economic development in the towns and cities, where presently infrastructure is largely poor. All these areas require urgent rationalisation, remedial actions for improved implementation and timely release of adequate funds for completion of construction projects.
The Government, realising the gravity of the situation in the housing and construction industry, has declared Housing and Construction as a priority industry and formulated a National Housing Policy. In the banking sector the measures already implemented relate to increase in areas such as exposure to housing finance, maximum per party limit, maximum debt-equity ratio and loan tenure.
In the fiscal area the measures include enhanced tax credit limit, limit of property income for withholding tax, of which rate reduced to 5%, withdrawal of CED on wires and cables, reduced duty on cement, rationalisation of stamp duties and registration fees, 5 year exemption of all taxes on plots, measuring up to 150 sq. yds and flats having an area of 1000 sq. ft. Besides, the provincial governments particularly the Government of Punjab has taken different measures relating to institutional and legal frame work.
Other provincial governments are also expected to take similar measures to bring improvement in housing affordability.
The above steps are in the right direction. But, effective implementation of these steps is necessary for the benefits to actually start accruing to the prospective house owners.
THE FOLLOWING CRITICAL AREAS MAY ALSO BE CONSIDERED BY THE GOVERNMENT:
a) The approach adopted for providing housing units to the government employees may also be extended for giving land to the shelter-less people, both in rural and urban areas. Infrastructure such as electricity, gas, waste disposal and water coupled with simplified procedure for land titling, construction permits and subsidised construction material may also be ensured. This may be the only way for providing shelter to the low-income people in the short term.
b) Housing societies, at least many of them, have shattered the dreams of prospective house owners. The government and the CDA at Islamabad have started review and registration of such societies. The government is urged to take such action throughout the country and also move quickly to help recover the money from fake building societies.
The provincial governments might make available new plots of land in sufficient number simultaneously throughout their cities and towns to overcome shortage of land for housing construction.
The working / performance of housing societies as well as of the developers / the builders may be monitored carefully to protect the interest of the house owners. Development of suburbs may be taken up to reduce congestion in city centres.
c) Health and safety of labour and technicians involved in the construction work is important. There is need to introduce measures to enhance safety and remove health hazards at construction sites along with the payment of adequate compensation for injury or death due to mishaps at construction sites.
d) Training and licensing of the construction contractors, builders and technicians such as electricians and plumbers might be started for improving their skills and practising their trade in construction industry. There is need to issue certain regulations or code of conduct to be complied with by these people and there should be specified forum to redress complaints from house owners.
e) The architects and engineers should be specially engaged to work on standardisation of building designs and manufacture of quality construction components that can be fitted at site and reduce time and cost required for completion of construction projects.
Standard cost manuals may be published as a guide to the house owners. R&D for developing low-cost construction materials might be encouraged at engineering universities and technical institutes.
f) The contractors may be required for providing bonds for the advance taken from house owners and for the completion of the work within time and of quality as per contract. There should be more laboratories for testing construction quality.
g) Pay rates for the workers in the construction industry have to be registered for making them legally binding. This should help eliminate ambiguity about workers' entitlements and help stamp out exploitation of these people.
h) Information technology may be effectively used in the construction industry for streamlining construction process and completion of projects within budgeted time and cost.