Turns out, the colossal failure of the Naya Pakistan Housing Plan (NPHP) wasn’t very obvious to policymakers and vehement critics of Imran Khan; now in power and part of the current government. And in all their years of acquired wisdom, they are coming up with another housing policy. Wait, did we say housing policy? No, we meant snake oil. But snake oil requires some level of ingenuity in order to sell it which no new housing policy in Pakistan could possibly possess. Though one does wonder, with so many willing conspirators and beneficiaries of the policy—construction materials manufacturers, real estate developers, builders, big construction companies, other tax evaders—the policy doesn’t marketing. It should sell itself.
One of the beneficiaries of the policy would be the cement industry. A tax-compliant sector makes money hand over fist even when demand in the domestic market dries up, and it does so owing to a number of reasons, only one of which is operational and cost efficiencies. Pricing power is arguably the primary one.
But if the housing policy gets approved—where property taxes, sales taxes, and FED might all receive generous cuts, in addition to a possible reintroduction of a housing subsidy—demand in the housing and construction industry will flourish. When the real estate amnesty and NPHP were introduced by the Khan government, cement demand reached its historic peak at 58 million tons (FY21). In 1H, this number was 29 million tons. Since then, cement dispatches have dropped to 23 million tons, down 21 percent.
At its current level of demand, exports are contributing more and more to the total dispatches—in 1HFY25, they are contributing 21 percent to total cement sales, up from 15 percent last year during the same period. Since a good proportion of sales are going toward exports, the better number to look at would be domestic dispatches which are down 25 percent in 1HFY25 from the peak. Naturally organic demand has been missing in action due to inflation, reduced buying power of home buyers, and reduction in public development spending. With all these factors along with construction costs also easing, and the monetary policy loosening up, the cuts in taxes should be a bonanza of funds pouring into construction which will serve the many ailing (think: steel rebars) and not-so-ailing sectors (cement).
But as with many previous housing policies, would it actually provide housing supply where it is needed most, and will it make housing more “affordable” or “low-cost” as it purports to do or will it just resuscitate demand in the market for a year or so until a new economic crisis comes? Will it carry through or will just fade into obscurity only to be recalled when the next similar housing policy is announced a few years down the line? Who did the previous housing policy serve? This is a good time to talk about that. More on that later.
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