By Engr Saad Iqbal
As per a recent report published by Pakistan Credit Rating Agency (PACRA), the construction industry of Pakistan is all set to expand in the coming financial year.
Experts from PACRA have reviewed the local construction industry and a growth of 6% has been reported this year. They’re believing the sector to grow by a whopping 92 percent in the next seven years as the average annual growth could spike up to 11.8 percent.
With more mega-projects coming in along with a series of works under CPEC (China Pakistan Economic Corridor), it is expected that the rating will further improve in the coming years.
With more incentives, concessions by the government to investors, and aggressive private sector investment there’s a growth in infrastructure and housing projects.
As a result, gross fixed capital formation has surged to over 6.6 percent in the private sector between FY2020 and FY2021.
In FY 2020, the construction sector had reportedly contributed Rs1,231bn and in FY2021, the same contribution has gone up to Rs 1,409bn.
If we look at the initial months of FY2022, there’s a significant growth of 70 percent year-on-year basic of the construction financing. It includes private investments, and Public Sector Development Program (PSDP).
The construction sector of Pakistan absorbs about 7.61 percent of the total labor force. It is pertinent that being the 5th most populous country in the world, the total strength of the labor force is around 60 million.
Because of the growing population at the rate of 2.4% as per the census of 2017, there’s an increased demand for houses and infrastructure projects.
That’s where the public sector kicks in as heavy investments are underway by realtors and financial institutions.
There are a number of mega transit and rehabilitation projects in the pipeline to suffice the growing demands of transportation and communication.
As per the Portfolio of the National Highway Authority, there are 40-on going projects with an allocation of PKR~176bln in PSDP budgeted expenditure for FY21.
Experts are hoping that the country will likely improve its international ranking for the size of its roads as new mega projects are underway for CPEC. The current ranking of Pakistan’s road length is 22nd in the world.
Apart from CPEC and private investments, another positive factor that contributed to the growth of the construction sector was the Government’s announced special packages including an amnesty scheme, tax exemptions, and allocation account of the Naya Pakistan Housing Scheme.
Such factors have significantly jacked up the construction and allied industries.
The growth of Pakistan’s construction industry is well in line with the global industry that is expected to reach US$15.2 trillion in 2022 that’s ahead of the last year’s numbers of US$13.6 trillion.
As reported, the industry plays a major role in contributing to gross domestic profit (GDP). In 2022, it is expected to reach 14.8% that’s ahead of what it contributed in the last year of 14.3%.
In FY20 there was an increase in construction activities by different construction companies by as much as 8.1% due to an increase in government support and the uptick in investment by the private sector.
As a result, the industry registered an increase in Gross Fixed Capital Formation (GFCF) in the private sector by around 20.6%.
One of the significant impacts of the construction sector growth is seen in 42 allied industries and ancillary sectors including cement, aluminum, brick, cables, fixtures, glass, kitchen and bathroom fittings, marble, paint, steel, tiles, transportation, warehousing, and wood.
Saad Iqbal is a civil engineering geek and a passionate blogger – with handy graphics designing skills. Saad loves to write on construction, home improvement, and innovative technologies.
