The previous governments badly neglected the housing needs of the poor. No mass housing schemes were launched as a result of which shanty towns have come up near all big cities. To solve the problem, the new PTI government has set up a committee to explore options for implementing PM Imran Khan’s five million houses initiative to benefit those without shelter, slum dwellers and other urban and rural low-income groups.
It is good that housing is being accorded high priority by the present government. Given that the provision and facilitation of housing is one of the most complex social development undertakings, many are looking forward to seeing how this unfolds. It may be added here that the demand for housing — especially for apartments in large cities such as Karachi, and single unit villas in various other urban locations — is intensifying due to changing sociological dynamics. For example, the joint family structure in cities is breaking down and nuclear families are growing.
Another important contributor to the swelling housing demand is the expanding housing backlog. According to some studies, a backlog of more than 11m housing units exists as per current estimates. About 450,000 formally built units are constructed annually with a predominant focus in urban areas, and the backlog continues to mount. Housing demand is also affected by migrations to the cities for better healthcare, education, employment, and safety and security reasons. Social dislocations caused due to geopolitical factors and terrorist and anti-terrorist campaigns during the past three decades also need to be studied in order to evaluate their impact on cities.
Replacement of housing stock is an important demand factor in the context of urban Pakistan. In the past, land was considered a social asset. Now it is traded as a saleable commodity. Urban land has become a product attracting investments in exponential proportions. Hence its prices rise to high limits where its availability and access become impossible for housing, particularly for a low-and-middle-income clientele. The rise in informal living and overcrowding in Karachi’s low-income residential areas is a visible reality. The emergence of katchi abadis in Islamabad also reflects the fact that better controlled and managed cities have not been able to extend affordable options to the urban poor. The struggle of the Awami Workers Party to find a solution to this issue in Islamabad is a good initiative and must be supported by the government.
Previous governments made allocations of land to various political favourites at less than market price. Unapproved land subdivisions and development of housing schemes by realtors in Karachi, Lahore and Islamabad have created severe distortions in the housing market. Housing finance is an important subsector. Studies indicate that at present not more than two per cent of finances are arranged through formal housing finance institutions. About 10pc lending is facilitated through informal sources while the remaining is facilitated through personal savings and other related means. State Bank reports have lamented the fact that the total housing finance mortgage market is around one per cent of GDP, one of the lowest in South Asia. High risks in transactions, poor governance and a breakdown of law and order on a routine basis impacts the scenario.
Some solutions have been recommended by experts in the past. Establishing housing resource centres at the district level is one option. These institutions may be empowered to gather and package up-to-date information about public and private sector housing options. Pilot projects may be launched for developing housing on cooperative basis for low-grade government employees, public organisations and formal private organisations. The House Building Finance Company must undertake innovatively designed packages to enhance clientele and expand access to housing to more needy groups.
Lately, some progress has been made towards easing the finance shortage in the housing sector. According to the State Bank, the volume of outstanding home loans has been increasing from year to year. Housing finance is gradually growing and the gross outstanding of all banks and DFIs surged to Rs 65.70 billion in 2016-17. At present, 24 Islamic and conventional banks, House Building Finance Company Limited (HBFCL) and one microfinance bank are catering to the housing finance needs and the current data confirms that the primary housing finance market in Pakistan is gradually growing which is a very positive sign for the economy. House Building Finance Company holds the largest share (22pc) in terms of outstanding home loans. Category-wise, Islamic banks remained the largest players with 39 percent share in outstanding loans.
According to experts, there is an urgent need to increase the primary mortgage market by extending services to the poor and low-income segments of society. The reasons for sluggishness in the growth of the mortgage market and services are many, ranging from difficulties related to foreclosure laws and title issues. The growth is also hampered by an ineffective institutional framework, absence of a secondary mortgage market, rising transaction costs and the generally unorganized state of the real estate sector.
Lessons can also be drawn from the experience of other countries in South Asia. For instance, Sri Lanka launched a Million Houses Programme some three decades ago. Its key components included provision of small loans, ensuring community participation in housing development ventures, revision of technical standards to conform to needs of the poor, technical assistance by the implementing agencies, extension of subsidies for local infrastructure provision and capacity building of the administrative and technical staff. Much can be learned from Sri Lanka’s example.