Construction sector relief

Abdul Kareem Adhia

The writer is Ex-Vice Chairman of Association of Builders And Developers of Pakistan (ABAD)

The construction sector is often considered as the spinal cord of a nation’s economy. Whenever tragedy strikes a nation, a crisis develops, or there is an economic crunch, or even if the government is providing any relief measures, the construction sector is crucial in such circumstances.
The construction sector is considered as the mother of 72 industries. These are allied to the construction industry and provides employment to thousands of people. Since independence, the construction industry has played a key role in the development of the country but has suffered official neglect and has failed to receive due attention by the authorities.
Prime Minister Imran Khan has given the construction sector the status of an industry. This decision has won the hearts and emboldened builders and developers across the country. The construction sector is often criticized but the reality is that 70 percent investment is done by the public and the rest by the builders. The construction industry has faced numerous problems for the past seven years which has harmed the government even more than investors.
The construction industry has been demanding a Fixed Tax Regime (FTR) from successive governments and institutions since several years. This does not imply evading taxes but aims to stop the interference of the FBR and other authorities. The absence of a fixed tax discourages investors from investing in the construction industry and encourages corruption among tax officials. The implementation of a fixed tax will lead to a surge in the construction industry.
We have recommended increasing the tax rate from 6.5 percent, but this proposal has been lying idle on the desk of the FBR, Economic Affairs Division, and even the prime minister and president. If this proposal is accepted, then it will strongly boost the construction sector and the national economy.
Before being declared an industry, the construction sector was mired into loopholes by the FBR on the pretext of withholding tax. In the quest to collect withholding taxes on the cement and steel sector, the FBR was impeding the growth of the construction sector, while builders and developers were merely acting as tax agents.
The prime minister has now relieved the construction sector from these shackles and has done a huge favour. A large number of people in the country are deprived of a home, while the construction industry is ready to offer its services in the provision of decent and affordable housing.
The banking sector does not provide loans on housing and construction, but the declaration as an industry will now benefit people the most. Builders might be able to work in any part of the world but those who are making the construction sector controversial in their own country by investing abroad and accumulations are living under grand delusions.
The prime minister’s incentives to increase investment in the construction sector are not new either and are given by governments worldwide. The incentives will run the allied industries, provide employment and benefit thousands of builders. The provision of loans by commercial banks will not only help builders but others who will be able to receive affordable housing.
The economic situation in the country has been worsening due to the two-weeks long lockdown. If the construction sector is revived, it will spur economic activity as people risk starvation and a law and order situation could develop which could be more lethal than the coronavirus pandemic.
The builders and developers in Pakistan stand with the government in the development of the country. The provision of incentives is a welcome step but the government should not rely on temporary relief but rather implement long-term measures that require the provision of a coherent policy for the construction sector.
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