The construction industry is thriving in various emerging economies and Singapore is the country which has boosted its economy by launching sprawling housing projects. Dynamics of the construction industry show positive side of the economy and growth of housing projects means growth of dozens of industries associated with it. The Pakistani government has recognisedthe construction industry as a vital sector of the economy and provided a relief in turnover tax for three years and alsoexempted sand and bricks from sales tax, which will not only prop up the qualitative and quantitative aspects of the housing projects but will alsomultiply the industrial output of subsidiary industries. According to experts, the tax relief provided to the construction industry in federal budget 2015-16 will not scale down the prices of residential units. They also call for reduction in duty from 20 percent to 10 percent on the import of machinery to make the residential units affordable for middle and lower middle income classes. Economists also believe that the federal excise duty on cement should be reduced and the government should collect sales tax from cement on ex-factory rates.
The annual demand of housing units in the country is over 8,000,000, while the current capacity of the construction industry is 350,000 housing units per year which can be enhanced to the desired level by rationalizing the tax policy for the real estate developers.The government is generating Rs 3 billion through the mortgage housing finance and if the ratio is fixed at a reasonable level, the annual earning of the government can be enhanced to Rs 7 billion. This will not only give buying power to common man, but will also improve revenue collections. The federal and provincial governments should encourage the developers in the private sector as well as individuals by offering them incentives of water and gas at the sites of the construction.
There is a need to document land record and rid the citizens of patwari culture which is one of the main hurdles in the way of construction industry. The rail and road network is also important to connect various localities in mega cities, including Karachi, Lahore and Faisalabad. Earlier, the Sindh government had fixed stamp duty target at Rs 6.5 billion, but could not achieve it, therefore, slashing the tariff of the stamp duty will definitely increase revenues up to Rs 13 billion. The tariff slapped by the Karachi Metropolitan Company is also irrational and needs to be slashed.
