ISLAMABAD-National Assembly Standing Committee on Finance and Revenue on Friday took notice of the challenges besieging the real estate sector, particularly due to the amendments to the Finance Act of 2023.
The committee underscored how the introduction of Section 7e has triggered stagnation in the sector, deterring prospective buyers and jeopardizing around 4 million jobs linked to the industry. Consequently, the Committee directed Member (Legal), FBR to engage with the Real Estate Federation to rectify issues related to Section 7e and devise a mutually beneficial solution that aligns with the state’s policies.
In an urgent call for transparency and accountability, the Committee seeks a comprehensive delineation from the State Bank of Pakistan (SBP) about the approval procedures and norms associated with the concessionary loan schemes in question. The Committee’s curiosity is piqued over potential abnormalities that could see loans being redirected towards real estate investments rather than their prescribed purpose of enhancing exports through industrial machinery installation.
The Committee is eager to explore possibilities of the loan funds being illegitimately transferred overseas or machinery being underutilized. They also express concern over the SBP’s apparent lack of follow-up oversight regarding loan utilization. In response, the Governor SBP reiterated that the sanctioning of such concessionary refinancing was approved under the provisions of the SBP Act, 1956, just like other schemes such as the Long-Term Financing Facility (LTFF) for export and non-export projects. He clarified that the SBP played no part in selecting the borrowers or disbursing the funds and that the total credit risk was undertaken by banks or Development Finance Institutions (DFIs). The banks and DFIs, he added, were directed to exercise due diligence in disbursing finances to borrowers.
The governor further stated that the financing under TERF was strictly for the procurement of new plants and machinery and was exclusively against Letters of Credit (LCs) or Irrevocable Letters of Credit (ILCs). He emphasized that the responsibility of ensuring that the funds were used for their intended purposes lay solely with the banks and DFIs. He also pointed out that neither the SBP nor the Government of Pakistan were providing risk coverage.
The governor revealed that out of the total 629 projects, 469 were fully operational, 89 partially operational, and the remaining 62 were expected to be operational by June 2025. He estimated that the TERF initiative would create approximately 194,300 jobs and generate 11 billion rupees of revenue in the upcoming years through export earnings and import substitutions. Moreover, committee members from Sindh expressed their apprehensions about the hardships of farmers in flood-affected areas, particularly widows, struggling with agricultural loan interest payments. The Committee urged the Minister of Finance to provide relief by suggesting that state-owned banks collect only the principal amount, forsaking exorbitant interest. Furthermore, the Committee demanded complete debt relief for the widows.
The committee decided to write a letter on behalf of Standing Committee of Finance and Revenue, to the Honorable Chief Justice of Pakistan, requesting urgent daily hearings on the review petition related to the non-disbursement of pensions for over 10,000 aggrieved former National Bank employees. Besides the Minister of Finance, Senator Ishaq Dar and Chairman, MNA Qaiser Ahmed Sheikh, the meeting was attended by MNAs; Ali Pervaiz, Dr Nafisa Shah, Makhdoom Syed Sami-ul-Hassan Gillani, Dr Ramesh Kumar Vankwani, Syed Ali Musa Gillani. The meeting was also attended by the senior officers from Finance Division, State Bank of Pakistan (SBP), National Bank of Pakistan (NBP), Federal Board of Revenue (FBR) and representatives from real estate federations.