PRIME Minister Imran Khan on Friday gave status of an industry to the construction sector and announced lucra tive incentives for investors and businessmen as part of the efforts of the Government to stimulate economy in the midst of Corona Virus outbreak. Apart from the taxation relief, the package announced by the Prime Minister envisages that all those making investment in the construction sector this year will not be asked source of income and a subsidy of Rs 30 billion for Naya Pakistan Housing Scheme. Package for construction sector was long due but its announcement was repeatedly delayed despite commitment of the Prime Minister to provide relief to the sector that plays crucial role in the overall economic development of the country and provision of job opportunities to people in different parts of the country. Cost of construction has gone up mainly due to imposition of various taxes by federal and provincial governments and devaluation of rupee that has pushed prices of all goods used by the building sector. In this backdrop, the Government has come out with a really attractive package of incentives and its announcement has evoked good response from all stakeholders. The seriousness of the Government can be judged by the fact that despite country-wide lockdown (albeit partial) it has allowed to open the construction sector for all sorts of activities from April 14, when the extended period of ‘restrictions’ on movement and gathering of people ends, an indication that the authorities were contemplating to relax these restrictions gradually from there onward. Otherwise too, the construction activity cannot take place without supplies from the allied industries and sectors, therefore, the Government will have to allow opening of businesses associated with cement, sand/gravel, iron bars, sanitary and hardware etc. The sector would surely attract massive investment as no source of investment would be asked, an incentive that has been likened to amnesty for construction industry with some analysts expressing apprehensions that it might attract attention of the Financial Action Task Force (FATF) also. But the Government has acted wisely by stipulating that the facility would be available just for one year and that too for construction activities and not for buying or selling of plots, which would help trigger construction activity at greater scale, complementing pledge of the Prime Minister to ensure availability of affordable housing for all. The decision not to charge Capital Gain Tax (CGT) on selling of houses by families, together with announcement of Punjab and KP governments to bring down overall taxes on transfer of real estate from the existing 6% to just 2% would also help promote real estate business, which was witnessing a sort of slump. Though Sindh and Balochistan governments have not so far announced similar measures but they would be forced to do so in view of competition for attracting investment. There would be an added advantage in the shape of lifting of withholding tax on construction from all sectors except steel and cement and lowering of sales tax in coordination with the provinces. As cement and steel constitute major portion of the construction expenditure, it would have been appropriate if taxes on these two industries were also reduced to make the package more relevant and meaningful. No doubt, the Government was in dire need of increasing its own revenues especially in the backdrop of unforeseen expenses being incurred in the fight against Covid-19 but acceleration of the economic activities would also help realize the objective of increasing tax collection besides saving people from the vagaries of lockdown and unemployment. Analysts have also pointed out that the incentives are meant for builders and there is no guarantee that they would pass on the relief to the buyers. The package would become meaningless if it does not realize the cherished objective of provision of affordable housing to the shelter-less. There is also genuine demand that the interest rate should be further brought down to single digit so that investors are able to secure loans for initiating housing projects.
