Construction sector estimated to expand by 92 percent in seven years

KARACHI: According to a report, the construction sector is estimated to grow by a whopping 92 percent in the next seven years, with an annual rate of 11.8 percent.

The growth would be based on infrastructure and housing projects.

The Pakistan Credit Rating Agency (PACRA) released a study that shows that the construction sector contributed Rs1,409bn in FY2021 as compared to Rs1,231bn in FY2020.

In FY2021, the construction sector witnessed a growth of 14.4 percent year-on-year, and its contribution to GDP dropped from 3.2 percent in FY2019 to 2.8 percent in FY2020.

According to the report, in the industrial sector, construction activity increased by 14.4 percent during FY2021, driven by aggressive private sector investment and increased government concessions.
Moreover, gross fixed capital formation in the private sector surged by 6.6 percent between FY2020 and FY2021.

In the initial eight months of FY2022, construction financing stood at Rs211 billion, signifying a growth of 70 percent year-on-year.

It is pertinent to state that the construction sector absorbs about 7.61 percent of the total labour force, providing stimulus to 42 ancillary sectors, including steel, cables, fixtures, glass, kitchen, cement, bricks, aluminium, marble, paint, ceramic tiles, transportation, bathroom fittings, warehousing, and wood.

In the construction sector, the drivers of demand are private investments and Public Sector Development Programme (PSDP) spending on uplift projects.

The majority of the construction revenue amasses from the award of government contracts ranging from buildings of highways to infrastructure etc. With the launch of CPEC, Pakistan’s construction sector has picked up the pace. In addition, the relief packages and subsidies provided by the government have also pushed for further growth in the industry.

Construction of residential housing units and buildings is also a major mover of the sector, specifically in the rural areas. As per the central bank, there is a shortfall of 12 million housing units in the country.