Economical housing is the matter of real concern specifically in developing countries like Pakistan where housing backlog is almost 10 million units. Deficiency of housing in Pakistan is a function of both quantity and affordability. In order to cope up the issue, government in 2018 announced Naya Pakistan Housing Project with an objective to target the poor. A large gap between the supply and demand for housing is evident in urban areas around the world. Because of the uncontrolled housing crisis, many families are forced to live in extreme conditions with unhealthy and unsafe homes.
By 2030, more than half of Pakistan’s estimated 250 million people are expected to live in cities compared to 36% now, according to the United Nations. And so, the demand for accommodation is expected to grow exponentially. This shortage is a problem if it is not always met and is a great opportunity for investors to enter this challenge and develop affordable housing for low income people. The housing shortages in Pakistan require an investment of $ 50 billion so, mandatory Government intervention is required for the solutions, in terms of infrastructure and urban planning, land reform, policy resources and incentives for mixed-use development, and the removal of regulatory barriers. As the land and construction cost has increasing over the past few years. The single story 5 Marla house has approximately a covered area of 910 sq. ft. The house has one kitchen, two bedrooms with attached bathrooms. The grey structure cost is 1,445/sq. ft and the land cost is 3,984/sq. ft. The cost of a 5 Marla unfinished single-story house comes to around 6.3 million. Complete purchase at this price is beyond the reach of majority of the population. If we review the details than we realize the fact that the price of land increased by around 195.3% from march-2011 to march-2021 in Pakistan.
According to the estimates of World Bank the total national housing shortage in Pakistan is more than 10 million units, with a gap of 350,000 units a year where the growing shortage is estimated to rise to 400,000 units. Therefore, the Naya Pakistan Housing Project not only improve the housing shortage in the country but also improve the unemployment because there are 30 to 40 industries directly or indirectly connected with the housing expansion and construction where it is estimated that 100,000-housing unit increase in one year contributes up to almost 2% of GDP. In addition, the provision of housing to the people greatly reduces the cost of health care and other economic and social costs imposed by urban slums so, it is very clear that conventional strategy is not at all the solution of the issue so, special planning in terms of Naya Pakistan Housing Program was the need of time but success of program will require well-planned long-term planning, as well as a strong financial model along with the inefficiencies in the real estate market will also need to be addressed. This will keep the affordable housing stock growing over time but require improvements in:
(1) Land reforms
(2) Land redistribution and land use laws
(3) Reduce market speculation
(4) Documenting the real estate sector
(5) Establish a real estate regulatory authority
(6) An effective governance system
But this program has many weaknesses as well including speed of work and unwillingness of commercial banks to increase loan processing instead of pressure from SBP. Housing development is highly dependent on a strong mortgage market, which is not the case here at all. Many countries have already overcome their housing shortages by doing so by creating a mortgage industry and providing the common people with a wide range of loans to buy or build a home. In terms of housing finance, the situation in Pakistan is much worse, with Pakistan standing lower in terms of Mortgage to GDP Ratio compared to the regional and global situation. Outstanding Financial Debts-Mortgages (M/D) represents a grim picture of Pakistan as a stand-alone or compared to other countries in the region. The rate in Pakistan is less than 1%. The outstanding mortgage debt has declined in Pakistan over the past decade while in India it is about 10%, Bangladesh is 5% and in other countries of the region such as Malaysia, Thailand, and Indonesia the rates are constantly rising, reflecting significant housing finance activities. However, in the case of Pakistan even 70 years after the country was born, the House Building finance Corporation (HBFC) is the only housing finance company. It is very disturbing to see the role and function of HBFC in the decline over the years. The shares of commercial real estate banks are very small compared to commercial banks around the world. Although the State Bank has taken other important steps to encourage banks to expand their house financing to support the government’s housing and construction industry, banks remain reluctant. The housing program will not start in a big way until we have a mortgage industry. That will always be a dream if the government does not tighten refunds to protect banks from potential losses.
It is recommended to support the densification process by developing urban design plans for those areas where it is taking place and providing technical and design advice to the builders along with short term loan packages, heavy non utilization fee on land and properties would have to be imposed to contain speculation on land and built assets. In order to conserve land an urban land ceiling act would also have to be enacted to limit land holdings per individual and a minimum density determined for all housing, including elite projects.
Legislation and governance is the real power of state required to be practiced to acquire land for low-income housing at appropriate locations. There is also a need of mortgage financing for lower middle-income group and daily wage earners to ensure the availability of housing for those groups, High rise buildings are cost efficient so it is highly recommended to consider this option as well. Selling of unused commercial areas is also a good option for the Government which may be utilized on the construction of new and cheap housing units for people to fulfil the dream of Naya Pakistan housing.
It is concluded with the fact that, the successful execution of project will require well planned long-term planning accompanied with the solid financing model. In addition, currently existing inefficiencies in the property and housing market will need to be tackled through the power of state which will keep the affordable housing stock growing even in the long run and In the absence of such steps, it is impossible to achieve better outcomes which we are expecting.
[box type=”note” align=”” class=”” width=””]The author is MD IRP/ Faculty Department of H&SS, Bahria University Karachi[/box]