Although the government has placed the construction sector on the path of progress, it still requires foreign investment to gather pace in a bid to meet the mammoth housing demand of Pakistan.
Investment in the construction industry has improved at the local level, however, foreign investors have remained shy of pouring money in the sector as the country braces to fulfil the piled up demand of 10 million housing units.
Speaking to The Express Tribune, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) former president Mian Anjum Nisar said, “Pakistan needed to prepare groundwork for attracting considerable foreign direct investment (FDI) in medium and long-term.”
He urged the government to turn the local environment conducive for foreign investors to achieve this aim.
“Pakistan will continue receiving FDI under the China-Pakistan Economic Corridor (CPEC) and it can also accelerate inflows by gaining wider domestic socio-political support for CPEC projects and removing procedural bottlenecks that delay their timely implementation,” he added.
Read: FDI falls 61% to $193.6m in December 2020
Keeping in view the balance of payments issue, Nisar said that the country needed as much foreign investment as possible considering that volumetric expansion in exports and remittances would prove to be a short-term phenomenon.
He lamented that Pakistan had been unable to attract any sizeable foreign investment for the past several years despite providing tax incentives and assurances of one-window facility to the investors.
Statistics show that the country received $1.3 billion in FDI during July-February period of fiscal year 2020-21 compared to $1.85 billion in the same period of last year, depicting a decline of 29.9%.
This indicates that the government has failed to win the confidence of foreign investors in the national economy due to multiple reasons, he highlighted. Moreover, the inflow of FDI in February 2021 registered a steep fall of 44% on a year-on-year basis.
“The pandemic has eroded the trust of investors which is having an adverse impact on FDI while rising uncertainty has sparked liquidity constraints for multinational firms.”
He considered it unfortunate that portfolio investment exhibited a gloomy picture as it recorded net outflow of $256 million during the first eight months of the ongoing fiscal year compared to an outflow of $26.3 million in the same period of last year.
“While the country is getting extra support from remittances being sent by overseas Pakistanis, it is difficult for Pakistan to improve the foreign investments and exports to a significant level,” he said.
Giving additional insights, National Coordination Committee on Housing, Construction and Development member Hassan Bakshi said that around 50% of the remittances flowing in Pakistan, totalling to nearly $12 billion, were entering the real estate sector.
“In terms of foreign exchange, this amount is probably more than what the textile sector of the country fetches every year,” he said. “This figure can be improved further if the government introduces additional reforms targeted at steering ease of doing business in the realty sector.”
He added that Pakistan’s annual demand for housing stands at 700,000 units while regulated and unregulated sections build up to 450,000 houses.
The shortfall is carried forward to next year and as a result, the backlog keeps hitting new highs as population growth rate is steeper than expansion of the real estate sector, he said.
Listing the challenges hindering the progress of the sector, he said there were issues of financing for supply side as well as for buyers which the current government has tried to resolve by encouraging the banking sector to uplift housing finance.
Also read: Pakistan remains ‘challenging environment’ for FDI
“Our hopes are pinned at digitalisation of the government offices that grant different kinds of permits to the realty sector stakeholders,” Bakshi added.
He demanded that the land records of cities should be digitised and all the necessary documentation should be computerised and filled through automated system to reduce or eliminate human interaction. He highlighted that the government officials helped racketeers in making fake documents, which resulted in disputes between two parties.
“In such a scenario, a case is registered in the court and sometimes it takes up to 30 years to resolve a land dispute,” he said.
Bakshi further called for introducing judicial reforms and formation of special courts to resolve such cases in just three months’ time period.
According to him, reforms would encourage foreign investors to invest in Pakistan’s realty sector which is giving 25-30% return a time when real estate of many developed countries are reporting losses.
Published in The Express Tribune, March 21st, 2021.
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