By Alauddin Masood
Against a backdrop of rapid urbanisation and rising population, Pakistan’s real estate sector continues to be dominated by a chronic shortage of housing units, which now stands around eight million.
There is an incremental demand for some 700,000 housing units annually in the country against the annual construction of around 200,000 units. If the pace of galloping deficit is not contained, knowledgeable circles maintain, then the shortage will rise to a million houses in the not too distant future, badly affecting the life of common citizens, socially and economically.
The ever-widening housing deficit has resulted in growth of squatter colonies and slum localities, particularly in main urban centers and metropolitan towns where many families are constrained to live in one-room shanty lodges. Generally, slum-dwellers face many obstacles, which deny them a permanent and decent shelter with a minimum of basic amenities, like water, sanitation, electricity, gas, drainage and above all proper healthcare and education. As such the slum-dwellers are forced to live in sub-human conditions in over-crowded localities.
Considered as one of the main drivers of economic growth, the construction and housing industry accounts for 10 to 12 per cent of GDP and 7 per cent of employment globally. While it can become the biggest creator of jobs, it can also engage some 40 supporting industries, thus creating demand for growth of economy on the one hand and alleviating poverty on the other.
Pakistan’s real estate sector and construction industry, which had been registering a steady and strong growth from 2001-2008, recorded a decline of 10.8 per cent in the financial year 2008-09. This was the largest fall in 37 years, according to the State Bank of Pakistan. Sharp increase in building material prices during the first eight months of the fiscal year 2008-2009, significant cut in disbursement of Public Sector Development Programme (PSDP) funds and dearth of financing facilities caused the construction activities to shrink significantly.
The weakening construction activity was a source of great concern, especially from the perspective of employment generation among the unskilled labour force and ultimately for poverty alleviation. Almost 3.3 million people were employed in the country’s construction sector in the financial year 2007-2008.
Recognising the gravity of housing situation and the potential of housing and construction industry as a productive sector of economy, the government declared this sector as a priority industry, some time back, aimed at employment generation, economic development and housing deficit reduction.
To give a boost to the construction sector and arrest the housing deficit, the government enhanced the house financing by banks to 10 per cent from the previous 5.0 per cent of net advances, while maximum loan limit was also increased to Rs10 million from Rs5 million, debt-equity ratio from 70:30 to 80:20 and loan tenure from 15 years to 20 years.
The policy measures introduced by the government did succeed in attracting private investors, including some foreign builders, to the real estate sector. However, most of the major projects currently moving forward are either being executed by developers from the Gulf or the government itself, which has embarked upon a project to construct one million houses in Islamabad and the four provincial capitals.
The leading investor amongst Gulf developers is Emaar Properties, which has undertaken development projects in Pakistan valuing at US $2.4 billion. Its subsidiary in Pakistan – ‘Emaar Pakistan’ has launched two projects in Islamabad and one in Karachi. Spread over 1,500 acres, its Islamabad projects include Highlands and Canyon Views, while its Karachi project has been styled as Crescent Bay.
An integral part of Karachi’s DHA Phase-8, Crescent Bay covers 108 acres, and it will span high-rise and mid-rise towers for residential and commercial use, all replete with comprehensive amenities, and DHA Golf Course. Ideally located near Karachi’s central business district, Crescent Bay will also include a shopping center as well as a 5-star beachfront hotel. It is destined to be the first ever waterfront living concept in Pakistan.
The Canyon Views, in Islamabad, is projected to comprise of 9,000 luxury single-family town homes and villas in a wide range of architectural styles with easy access to amenities, including retail centers, community club houses, parks, lakes, schools and mosques. Launched in 2006, Canyon Views is the first world class gated community in Pakistan. The first batch of Mirador Villas in this project was completed, in 2009, and handed over to the owners, who are residing there. Now, it is offering ready-to-move-in villas; while planning to come up with projects whereby it will offer residential plots to people to build custom-made houses.
Through its projects, Emaar claims to be trying to recreate the same successful ‘Dubai model’ in Pakistan with its master-planned communities, supporting a healthy lifestyle with wide open spaces, parks recreation areas and community centers.
A market of over 180 million people and also a fast emerging hub for regional economic activity, in particular for export of manufactures to the Middle East, Central Asia and South Asia, there is a great demand for houses in Pakistan, in particular by a strong segment of upwardly mobile young professionals, who are looking for world-class residences and offices.
The investments in housing can potentially help to resuscitate Pakistan’s economy by creating millions of new jobs, directly and indirectly, while considerably easing the acute shortage of housing. Construction happens to be one of the most labour intensive economic activities, requiring large numbers of workers and creating thousands of jobs. And when the buyers move in, they also demand all kinds of products and services to furnish their homes, thereby creating further employment opportunities. All this offers a great recipe for reigniting economic growth and renewed prosperity in Pakistan.
