After years of stagnation, there seems a revival of the construction and housing services sub-sectors in Pakistan.
These two sectors reflect the level of development in a country. Construction from the perspective of GDP, broadly speaking, deals with civil engineering work, consisting of new buildings, roads, bridges, railway lines, transmission lines, dams, etc.
The share of construction sector is around 2.5 per cent in the GDP statistics and this share seems understated as the last housing census was conducted in 1998.
Similarly, the housing services sector is composed of owner-occupied housing, residential and non-residential real estate, cooperative and private housing societies, contributing around 6.75 per cent to the GDP. Both sub-sectors contribute more than 9 per cent to the GDP of Pakistan which is lower than the statistics in advanced economies where these sectors contribute between 16 and 20 per cent to the GDP.
Cement and steel are the major raw materials required and consumed in these sub-sectors. For instance, cement and steel gobble up 45-55 per cent of the cost of construction.
The first glimpse of the revival of these sectors can be caught through cement sales in Pakistan. The local cement consumption increased around 17 per cent in the first nine months of fiscal year 2015-16, while there was a deceleration in the growth of cement exports during the period. However, cement demand grew a healthy 10 per cent on the whole.
The demand for the other major raw material – steel – has also increased. In the first nine months of FY16, imports of steel rose 30 per cent in quantitative terms since two-thirds of steel demand in Pakistan is met through imports.
Apart from these two major raw materials, allied industries have been registering a double-digit growth. For instance, the value of aluminium imports sprang up 35 per cent and a 21 per cent growth was noted in the paint industry and even glass industry was not falling behind in the race.
The revival of construction and housing services can make a strong case of ‘Crowding In’, implying that public investment can bring private investment as well.
