Futuristic Investment Group: National Housing Policy

POLICY MEASURES:
The Housing and Construction sector has also been declared as Industry and placed under priority Industries i.e. category “C” of the Investment Policy. Local and Foreign Companies involved in real estate projects will not market these projects unless the title of the property is transferred in the name of a locally incorporated company and the “Commencement of Business” certificate is issued by the Securities and Exchange Commission of Pakistan (SECP) to the company.
Enhanced Credit Facilities
• The annual disbursement of HBFC loans has been enhanced from the present Rs 1.2 billion to Rs 7.00 billion over the next 5 years.
• HBFC has introduced bridge financing and bulk financing of housing projects through escrow accounting together with appropriate safeguards.
• Banks Exposure to House Finance has been enhanced from 5% to 10% of their net advances.
• The maximum per party limit has been increased from Rs. 5 million to Rs. 10 million. The maximum debt-equity for housing loans has been increased from 70:30 to 80:20.
• Banks have been allowed to deduct up to 3% of the income arising out of consumer loans for creation of reserve to off-set bad debts in this segment.
• The maximum loan tenure for housing finance has been increased from 15 years to 20 years.
• Banks and DFIs are extending credit facilities for balancing, modernization and replacement (BMR) of machinery used for housing & construction industry.
• Property tax on rented property and for self occupancy has been rationalized.
Construction Services Sector
• Income from property has been brought under Presumptive Tax Regime; Tax @ 5% of the gross rentals shall constitute full and final discharge of Tax liability.
• Stamp duties and registration fees are being rationalized for housing mortgage.
• Tax @ 1% is charges on import of Cement under clause (13G) of Part II of second schedule to the Income Tax Ordinance, 2001.
• CED on wires and cables has been withdrawn to lessen cost of construction.
• Housing and construction companies are charged via Presumptive Tax Regime, which shall not exceed 1% on yearly receipts.
Incentives
• Non-utilization fee shall be charged on annual incremental basis only after notified handing over of the development scheme by the development agency to the municipality.
• Stamp duties and registration fees, which are exceptionally high as compared to other countries, shall be adequately reduced to an aggregate total of 1% to enhance registration, improve documentation and increase revenue receipts.
• Import of plant and machinery and spares by the housing and construction companies, not manufactured locally, shall be exempt from custom and import duties in excess of 10%. This will be in accordance with government notification declaring housing and construction as priority “C” industry.

• Guarantees issued by “A” rated insurance companies approved by the Securities & Exchange Commission, in respect of earnest money, retention money, performance maintenance & mobilization advance shall be accepted by various government agencies, departments, etc for implementing housing projects.
Promote Home Ownership
• No stamp duty/registration fee, etc shall be charged for the housing mortgage.
• Property tax on rented property shall be reduced from the current high rate of 25% to 5%.
Low Income, Low Cost
• All news construction of houses on plots, measuring up to 150 sq. yards and flats/apartments have an area of 1000 sq. ft. have been exempted from all types of taxes for a period of 5 years.
Revision / updation of building code of Pakistan:
Immediately after the earthquake of 8th October 2005, Cabinet was briefed on 13-10-2005 regarding the earthquake relief and it was inter alia, decided to undertake revision of building codes and regulations at the national level to ensure safety and security of the residents of buildings.
Accordingly, based on the recommendations prepared by NESPAK for preliminary seismic design parameters and criteria for seismic resistant design of building in Islamabad – Rawalpindi area, the Prime Minister on 31-1-2006 and the Cabinet in its meeting held on 2-3-2006 also endorsed the decisions taken by the Prime Minister.
The decisions taken include:
• Placement of Islamabad–Rawalpindi area in Zone-3 (moderate to Severe Damage) instead of the existing position in Zone-2 (Minor to Moderate Damage)
• Taking Peak Ground Acceleration (PGA) values ranging between 0.20g – 0.30g for rock sites as basis for design of various-types of buildings.
• Adoption of International Building Code – 2003 applicable for designing of the buildings in the area.
• Enforcement of revised building code/parameters by CDA/RDA under their existing building byelaws/ regulations for Islamabad/Rawalpindi area.
• No restriction on the height of the buildings in Islamabad/Rawalpindi area subject to construction as per revised building parameters.
• Banning the production/use of cold-twisted (TOR) steel bars in the country.
• Mandatory “Completion Certificate” for higher buildings.