{"id":81068,"date":"2020-02-07T11:09:33","date_gmt":"2020-02-07T11:09:33","guid":{"rendered":"https:\/\/www.zameen.com\/blog\/?p=81068"},"modified":"2020-02-07T11:12:02","modified_gmt":"2020-02-07T11:12:02","slug":"naya-pakistan-housing-affordability","status":"publish","type":"post","link":"https:\/\/www.zameen.com\/blog\/naya-pakistan-housing-affordability.html","title":{"rendered":"Naya Pakistan Housing and Construction Costs"},"content":{"rendered":"\n

In Pakistan, housing developers\u2019 pleas for tax benefits or concessionary treatment in order to ensure low selling prices under the Naya Pakistan Housing Plan may have lent ears to the right government quarters. PM Imran Khan has announced that the government will not collect any sales and fixed taxes from construction activities<\/a>, under the Naya Pakistan Housing Program (NPHP). Let\u2019s see how significantly it impacts the ultimate selling prices of houses. <\/p>\n\n\n\n

According to the Federal\nBoard of Revenue\u2019s (FBR) yearbook, sales tax collected from cement and steel\nindustries alone made up 5 percent of total sales tax collected from\ncommodities. In FY19, using the figures for total dispatches and total sales\ntax collected from the cement sector, tax collected per ton was calculated to\nbe PKR 461. Based on a simple estimate made by Elixer Securities, 1 million\nhouses (2.2 marla or approximately 600 sq ft.) could generate demand for 10\nmillion tons of cement. At this rate, 5 million houses would generate demand\nfor 50 million tons of cement. <\/p>\n\n\n\n

Using these\nestimates and doing the calculations, it can be seen that the government would\nbe losing over PKR 5 billion in annual sales tax revenues just from cement\nalone (In FY19, total sales tax revenue collected on cement by FBR was PKR 21.6\nbillion where total dispatches stood at 46.88 million tons). The total amount\nwill be even higher if steel and other important building materials are added\nto the equation.<\/p>\n\n\n\n

\"Sales
Numbers indicating difference between sales tax collected and sales tax per ton on cement dispatches<\/figcaption><\/figure>\n\n\n\n

No doubt, the\ngovernment would make up for this loss of revenue by levying higher taxes elsewhere.\nThe question is, what difference would it make to the final cost of the houses?\n<\/p>\n\n\n\n

Let\u2019s Consider the\nimpact of inflation on construction costs. The Consumer Price Index (CPI) grew by\n12 percent between Aug-18 to Aug-19. According to the Pakistan Bureau of\nStatistics (PBS), the price index for construction items, however, grew by 14\npercent during the same period. Similarly, from Aug-18 to Nov-19, CPI increased\nup to 15 percent, while construction item inflation rose up to 16 percent. If\nwe use the total construction cost of PKR 4.5 trillion to build 5 million\nhouses, quoted by the Naya Pakistan Housing Authority (NPHA) early last year,\nthe construction item inflation should alone add PKS 630 billion to that\nnumber.<\/p>\n\n\n\n

Moreover, with the\nincrease in demand, cement, and steel, manufacturers are likely to raise prices\nfurther. The incremental cost of construction seems simply too high. The\nquestion is whether or not the developers will eventually be able to keep\nhousing prices low, at a level where they are affordable for low-income\nhouseholds, given that the taxes are exempted. More importantly, how can\naffordability be enhanced in the current economic scenario? It is also\nimportant to gauge the affordability of pilot projects, announced under the\nPunjab Housing and Town Planning Agency (PHATA). Further details on this will\nbe discussed in part II.<\/p>\n","protected":false},"excerpt":{"rendered":"

In Pakistan, housing developers\u2019 pleas for tax benefits or concessionary treatment in order to ensure low selling prices under the Naya Pakistan Housing Plan may have lent ears to the right government quarters. PM Imran Khan has announced that the government will not collect any sales and fixed taxes from construction activities, under the Naya Pakistan Housing Program (NPHP). Let\u2019s see how significantly it impacts the ultimate selling prices of houses. According to the Federal Board of Revenue\u2019s (FBR) yearbook, sales tax collected from cement and steel industries alone made up 5 percent of total sales tax collected from commodities. In FY19, using the figures for total dispatches and total sales tax collected from the cement sector, tax collected per ton was calculated to be PKR 461. Based on a simple estimate made by Elixer Securities, 1 million houses (2.2 marla or approximately 600 sq ft.) could generate demand for 10 million tons of cement. At this rate, 5 million houses would generate demand for 50 million tons of cement. Using these estimates and doing the calculations, it can be seen that the government would be losing over PKR 5 billion in annual sales tax revenues just from cement alone…<\/p>\n","protected":false},"author":97,"featured_media":81072,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[29],"tags":[],"persona":[32409,32415],"class_list":{"0":"post-81068","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-construction","8":"persona-constructiondevelopments","9":"persona-market-trends","10":"cat-29-id"},"acf":[],"yoast_head":"\nHousing Construction Costs and Affordability in Pakistan | Zameen Research<\/title>\n<meta name=\"description\" content=\"Analyzing Housing Affordability in Light of Naya Pakistan Housing Plan and Inflation.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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