PM Imran Khan Announces Incentive Package for Construction Industry
Prime Minister Imran Khan has announced a mega incentive package for the construction sector today in a bid to create jobs and spur economic growth in Pakistan. The Government had been working diligently for the past one year on this stimulus package despite various constraints. Such announcement was the need of the day also as hundreds of thousands of daily wagers have become jobless due to perpetuation of countrywide lockdown.
As we know that construction sector alone can revive more than three dozen related industries, thus creating millions of jobs to bolster a frail economy. All the stakeholders have been taken on board while preparing this relief package, and key suggestions from Association of Builders & Developers (ABAD) have all been accepted. Many of the incentives announced for the construction sector, especially tax benefits for construction and allied industries, can potentially turnaround our economic condition provided that the COVID-19 challenge is carefully tackled and special SOPs are designed for industrial workers.
For the first time in Pakistan, construction sector is going to be turned into a formal industry, hence a Construction Industry Development Board (CIBD) will be created in order to promote construction activities in the country. This board will operate under the supervision of the Federal Government and it will design policies to streamline the intricate procedures faced by developers and builders.
Following are the main points of the Incentive Package for Construction Industry:
- Those builders and developers who invest in construction sector for this year will not be asked about their source of funds. Whatever be their source of investment, they will not be answerable to FBR for this year. This step may bring a deluge of investments in real estate and construction sector this year.
- Fixed tax regime will be imposed on construction sector, i.e. fixed tax amount per square feet of construction area will be charged by FBR. This was the persistent demand from the builders which has now been fulfilled.
- Those builders and developers who launch their construction projects under Naya Pakistan Housing Scheme will be given 90% waiver on tax.
- Withholding tax has been repealed on construction materials and services except Steel and Cement which are formal industries.
- Sales Tax for construction industry has been reduced to approximately 2%. Federal Government has taken all Provincial Governments on board to implement new sales tax policy.
- Capital Gains Tax has been repealed on sale of family house/residential unit.
- 30 billion rupees worth subsidy is being granted for Naya Pakistan Housing Program to build low cost houses for the poor.
- Construction Sector has been given the status of Industry.
This unprecedented incentive package is being lauded as historic by builders & developers across Pakistan. It will help construction industry to flourish in Pakistan which can literally turn around the economic outlook of the country.
Another important step which is part of the incentive package is the approval process of new residential and commercial projects. Development authorities have been bound to approve a new project within 45 days of application unless there is a valid objection. We know that it takes a lot of time and money to get NOC for a residential or commercial project from local development authorities, but the issue has now been resolved through a historic decision.
This incentive package can turn out to be a watershed for the economic growth in Pakistan, and we hope that all relevant departments will follow the policies outlined by the Federal Government. Construction Industry Development Board will further devise policies to strengthen this industry by removing hurdles and glitches in the system so that new investors can enter easily and play their part in the economic growth.
You may watch the policy announcement video below:
