Karachi: The recently proposed budgetary measures provide a nuanced outlook for the construction sector, with certain incentives that may offer a modest boost, counterbalanced by several risks. The budget includes a tax credit for housing mortgages, a subsidy of Rs5 billion for the housing sector, and a Rs5 billion markup subsidy for low-cost housing. Additionally, the budget proposes reduced withholding tax for property buyers.

The Finance Bill's plan to phase out sales tax exemptions in the FATA/PATA region is expected to positively impact steel producers operating outside this area. However, the budget also outlines a 9% reduction in the Public Sector Development Program (PSDP) target, setting it at Rs1 trillion, marking a decrease from the previous fiscal year's revised PSDP.

Furthermore, the budget proposes an increase in withholding tax on property sellers and places restrictions on property acquisitions by non-filers. These measures may pose challenges to the construction and property sectors.

In the cement industry, Maple Leaf Cement Factory (MLCF) and D.G. Khan Cement Company (DGKC) have been identified as preferred picks. Meanwhile, in the steel sector, Mughal Iron and Steel Industries Limited (MUGHAL) is favored.

The construction sector, along with its allied industries such as cement, steel, and glass, has experienced a negative year-on-year trend over the past three years. The proposed budgetary measures aim to address some of these challenges, though the impact remains uncertain.