Construction is one of the fortunate sectors in Pakistan that has gained major relief in the Federal Budget 2015-2016. The government has given special tax relief to the builders in order to facilitate the real estate industry. As a result, businesses related to construction, sale of houses and other buildings not only gained an exemption on minimum tax, but received incentives too.
To begin with, Capital Gains of any person who sells his/her property to a Real Estate Investment Trust (REIT) Development Scheme formed to develop housing sector are not taxable till June 30, 2018. Furthermore, if any REIT Scheme for housing sector is setup up to June 30, 2018 it will gain 50 percent tax waiver on chargeable dividend income.
As for the construction industry, government has relieved supply of crushed stone and bricks from Sales Tax up till June 30, 2018. Furthermore, Custom Duty on the import of used super swinger truck conveyors, concrete placing trucks, dump trucks, crane lories, truck mounted lories, mobile canal lining equipment and transit miners acquired from construction firms registered with SECP and the Pakistan Engineering Council is slashed from 30% to 20%.
Overview of Construction Industry:
The construction industry in Pakistan is already mounting on the back of increasing infrastructure activities, rising demand of houses and construction recovery. Substantial decrease in interest rates, oil, electricity and coal prices will further favour the sector. Experts are of the view that reduced interest rate regimes always prove positive for the construction sector.
All in all, 2016 outlook for construction sector is positive as all the relief measures for builders and developers would give a significant boost to the multi-billion dollar industry.
Overview of Real-Estate Industry:
To the extent the real-estate is concerned, the industry witnessed a largely positive first month in 2016. Therefore, many started to hope that February too would remain positive for the for the real-estate sector. Unfortunately, this expectation didn’t materialize across the board, but encouraging price ascents were observed here and there. Most of all, no sharp declines were observed.
Lahore’s Real-Estate Market:
The first two months of 2016 have remained generally positive for Lahore’s real-estate market. During February 2016, major shift in prices were recorded in Bahria Town Lahore where 1 kanal plots have seen a sharp 5% increase.
For many it may have been an unexpected surge since the society is embroiled in the controversy of Lahore Ring Road cutting through it. But those who were of the view that Malik Riaz won’t leave this issue unresolved and believed the authenticity of recent public notification from Bahria Town’s management reading that Higher Authorities have discarded their plan to have the Ring Road pass through Bahria Town, never lost their confidence in the locality.
After Bahria Town, Wapda Town and Defence Housing Society (DHA) Phases 1 to 6 posted healthy gains in the last month, with investors seeing limited growth in 1 kanal category. Whereas, 10 marla plots in DHA Phase 7, 8 & 9 registered more than 1% rise in prices.
In contrast, LDA Avenue 1 that has gained a lot of traction in January 2016, failed to excite investors much in February 2016.
Investment Opportunities in Lahore:
o According to experts, DHA Phase VIII and Prism 9 in Lahore are one of the potential localities in the city that proffers attractive returns on investments in commercial properties both in short and long-term. Whilst for home builders, DHA Phase 5, 6 and 7 seems more promising.
o People who are not too keen to invest in DHA can look into projects like Bahria Town, Sukh Chayn Garden, Valencia Town, Tariq Garden, NFC Phase 1, Khayaban-e-Amin and DHA Rahbar Phase 1 & 2.
o But, societies located between Thokar Niaz Baig and Hadiyara Drain seems more attractive. Considering the fact that Chief Minister of Punjab Mian Shahbaz Sharif has now approved the plan to widen the road from Thokar Niaz Baig to Hadiyara Drain in an important meeting on Thursday, March 3, 2016. Under the plan the new road will be made of four lanes in order to improve the traffic flow.
o Fazaia House Scheme Phase 2 also promises great potential in the long-term. At present, the slow progress on the southern loop of Lahore Ring Road is averting investors from investing aggressively in the society. But, it is anticipated that once the route is completed the strategic interchanges and roads sprouting from Lahore Ring Road will make the housing scheme well within reach.
Islamabad’s Real-Estate Market:
Unlike the first month of the year, federal capital’s real-estate market fails to depict any impressive numbers in February 2016. Prices of 1 kanal plots in all major societies, like Bahria Town, Sector F-11 and Defence Housing Society, remained unchanged.
On the contrary, the 10 marla category in DHA Islamabad and Sector E-11 showed restricted growth. The good news is no major plunges were observed during the month. So experts believe that stability will only smooth the path for growth and enable the market to gain momentum in the days to come.
Investment Opportunities in Islamabad:
o Many real-estate businesses in the capital city believe that Sector G-6, 7, 8, 9, 10 & 11 are great for short-term investment. Apart from these Sectors B-17, C-14, C-15, C-16, C-17, D-13, E-11/1, E-11/3 F-17 and I-12 can also be considered to make good proceeds in short time. Since the Margalla Road is expected to complete within a year that can kick up the prices in nearby sectors.
o As for the long-term, localities like Bahria Enclave 1, Park Enclave 2, Mulit Residencia & Orchards, a farmhouse society, can prove lucrative for investors. The latter is probable to give possessions in Block A from April 2016.
o Other lucrative investment opportunities can be found around the New Islamabad International Airport, which includes Pakistan Employees Cooperative Housing Society, Mumtaz City and Top City-1.
Disclaimer: The projections or other information generated in this report by AmerAdnan Associates regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Additionally, it is imperative to note that info in this report is based upon experts’ views and financial figures input on the date above; results provided may vary with subsequent uses and over time.