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Existing growth in construction likely shape up real estate sector

Existing growth in construction likely shape up real estate sector

Pakistan’s economy is on the increase speed
Cement and steel estimated of having a good time

Interview with Mr Ahmed Owais Thanvi – Managing Director, Kings Group of Builders & Developers

PAGE: Kindly tell me about yourself and your organization:

Ahmed Owais Thanvi: I am Managing Director of Kings Group of Builders & Developers. The Kings Group of Builders & Developers is a construction company with a nationwide operation in Pakistan since 1977. The Kings Group of Builders & Developers provides high quality services to their valued clients, across all sectors and have set a strong benchmark for the industry. Based in Karachi, Kings Group provides a comprehensive range of services to a wide range of clients which includes construction of high quality houses as well as high rise buildings at the rate of approximately 1000 property units per year in Karachi.

PAGE: How would you comment on the real estate and construction sector of Pakistan?

Ahmed Owais Thanvi: The real estate sector is considered as a major investment opportunity by most Pakistanis, especially if they have the money in hand and want to make a profit. While the investments in real estate are fairly long-term, if investors have enough funds to meet their everyday needs, the time duration taken to pay out returns is often overlooked. However, Pakistan’s economic and political stability is questionable, even in the best of times, with markets seeing sudden dips at the smallest of unrest. Thus, it becomes vital for real estate investors to discover how feasible it is to make an investment within this sector for the coming year.

While the real estate sector might have seen downtimes during 2019 due to the unstable political conditions of the country, the sector is expected to see a rise in investments within the a year, especially as there are several new developments underway throughout the country that will affect real estate values upon their completion.

PAGE: Do you think an ordinary citizen in Pakistan could afford to purchase an apartment?

Ahmed Owais Thanvi: The marked improvement in the security situation has spiraled up the property prices up to 130 percent in the metropolis of the country during the past five years. The high demand of local real estate was witnessed from multiple sections of customers and investors. Other than overseas Pakistanis, industrialists and businessmen made huge investments in the sector. Unfortunately, the booming prices caused a gradual decline in the purchasing power of the genuine buyers and their share in the housing sector.

PAGE: Are taxation issues a hurdle in the growth of the real estate and construction sector?

Ahmed Owais Thanvi: The tax policies of the government are unfair. The stakeholders are willing to pay taxes, however, the tax policy should be formulated in collaboration with the important stakeholders to maximize its effectiveness and assist in widening of the tax net. It should be levied gradually and uniformly as millions of people are associated with it.



PAGE: Have the cement and steel prices skyrocketed recently?

Ahmed Owais Thanvi: Builders estimate a 35 percent jump in the cost of construction in the last 6 or 8 months in view of rising steel, cement and other construction related material prices. The cement makers had also raised prices by Rs30 per 50 kg bag on account of rising transportation charges. A cement bag would cost Rs20-30 more after implementation of enhanced federal excise duty from July 1, 2019.

Construction sector has already been facing a lull as no new projects are coming up while work at over 50 projects in Karachi alone have already stopped due to escalating costs after increase in steel bar and cement prices affecting our project costing.

PAGE: Your views on the growth in business activities during next fiscal year:

Ahmed Owais Thanvi: As per the World Economic League Table 2020, published by the Centre for Economics and Business Research, Pakistan had a PPP (Purchasing Power Parity) adjusted GDP per capita of $5,872 in 2019, making it a lower middle-income country. The economy of Pakistan has carried forward the momentum from last year, with GDP set to have risen by 3.3 percent in 2019, down from 5.5pc in 2018, said the report.

Pakistan’s per capita incomes have increased steadily over the last few years, with the robust rate of economic expansion twinned with a low rate of population growth, which has averaged just 1.9% per year between 2014 and 2019. Between 2020 and 2025, the Centre for Economics and Business Research forecasts that the annual rate of GDP growth will rise to an average of 4.2 percent. Over the remainder of the forecast horizon, economic growth is expected to accelerate further to an average of 5.0 percent per year. However, between 2019 and 2034, Pakistan is forecast to move from 44th place to 50th place in the World Economic League.

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