Imaginative move to stimulate economy


Malik Ashraf

GIVING the status of industry to the construction sector followed by the announcement of a package for facilitating investments in it as well as cheaper loans for the people to build their own homes, by the Naya Pakistan Housing Authority, are surely imaginative moves to stimulate the fledgling economy which has been badly hit by the onset of Coronavirus. The fact that no questions will be asked about the source of money to be invested in the sector is a big incentive for the people to play their role in the revival of the construction industry as well as contributing their bit to the overall revival of the economy. Construction industry is connected to nearly 40 other industries. Its rejuvenation would certainly have a spill-over effect on them.
The state of the economy is such that the government does not have the required resources to rejuvenate the economy through financial injections in different sectors. The best course available to it is to provide a congenial and facilitating environment to encourage the people to come forth to stimulate the growth process. According to a report compiled by International Labour Organization, the informal economy in Pakistan accounts for more than 70% of the employment in main jobs outside agriculture sector. It has observed speedy growth in the last decades as compared to the formal economy which has 35% share in the country’s GDP which is the highest in the developing countries. Another painful reality is that in a population of 220 million only three million people pay tax. In view of these facts it would not be wrong to draw the inference that people do have enormous hidden wealth which if channelized to productive channels through appropriate incentive schemes can give tremendous boost to the economy.
Some people are critical of the initiative taken by the government saying that it has provided the people to whiten their black money not realizing the fact that extra-ordinary situations need extra-ordinary responses and policy initiatives. The other collateral benefit of this would be a boost to the efforts of documenting the economy as well as increasing government revenues due to the new and recorded investments. Apart from the concessions given in different taxes for investment in the housing projects launched by the private sector the government has also made sure that the poor people who do not have houses of their own are also provided with the opportunity to have their dreams fulfilled. The banks have earmarked Rs.300 billion for advancing loans to the people at a very low mark-up. For a house to be built on five marla plot the mark-up will be 5% while for a 10 marla house the interest will be 7%. The government has also announced a subsidy of Rs.300000 each on the first one hundred thousand houses which are built after the announcement of this scheme.
Owning a house for an individual and a family means an investment whose value keeps increasing, which helps create the buying and reinvestment power known as equity. Home ownership also stabilizes other home-related expenses like utilities and gives the owner more control over his/her ability to make investment in property which keep those expenses down. It helps create a sustainable future in many different ways and a long-term plan significantly reduces living expenses as they move towards a retirement budget; staying in one’s own home instead of a rented accommodation allows financial and emotional investment in the owned living space and community. Staying put for longer periods of time also creates social benefits that range from friendships with neighbours to community involvement and consistent educational opportunities for children. In some societies, it also means social recognition and prestige.
Food and shelter are the most inescapable basic human needs and owning a home is the dream of every individual and family. States with a welfare creed and agenda strive to ensure that all the people living within their territorial limits are provided with some kind of shelter called a home according to their needs and range of affordability. The issue of housing has economic, social and political dimensions both for the families owning the house and for the government pursuing this strategic goal. For political parties vying with each other for political power by winning the franchise of the people, housing invariably is an important issue and a great catalyst to their electoral victories.
PTI’s rise to power owes, among other things, to its manifesto promising 10 million jobs and five million housing units for the lower and lower-middle income groups by playing a role of enabler and facilitator. Pakistan faces an overall backlog of 11.2 million housing units with a shortage of four million and 7-8 million in the urban and rural areas of the country. Prime Minister Imran Khan has shown tremendous interest in housing sector in line with the manifesto of the party. It all seems very encouraging and indicates the commitment of the government to give a boost to the fledgling economy as well as solving housing problem of the lower income groups. Only time will reveal the final outcome but the beginning is quite auspicious. The successful implementation of the schemes as envisioned will unleash huge economic activity in the country which will not only reinforce the building industry but also help in the emergence of down-the-stream industries besides creation of thousands of jobs. The multiplier effect of this huge investment will accrue infinite impetus to the economy as a whole.
— The writer is freelance columnist based in Islamabad.

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