FeaturedNationalVolume 14 Issue # 06

Castles in the air

Prime Minister Imran Khan has launched the Naya Pakistan Housing Programme to build 5 million low-cost houses for the poor during the next five years as part of the Pakistan Tehreek-e-Insaf (PTI) manifesto. Experts say the housing scheme was announced without proper homework and only aimed to divert the public attention from rising prices and inflated power and gas bills.


If completed, the project can cut the housing backlog in half, support dozens of allied industries, create millions of jobs and provide the necessary stimulus for economic growth. It aims to provide houses to people with monthly earnings between Rs10,000 and Rs25,000 and also generate employment opportunities as the construction industry provides fodder for 40 downstream industries. However, details of financing were missing from the launching ceremony, though the prime minister referred to public-private partnership while officials said around $20 billion foreign direct investment is expected in the sector – an estimate based on queries from prospective investors from abroad. The government will form a land bank to get information of land of federal and provincial governments and it would only provide land to people while the private sector would invest in it. The government will collect data of Katchi Abadis (slums) to relocate people to houses, which would be built with ownership rights.


The website of the National Database and Registration Authority (NADRA) crashed after it uploaded the registration form for the housing scheme. In the first phase, Sukkur, Quetta, Gilgit, Muzaffarabad, Swat, Islamabad and Faisalabad districts were included in the project. Later, Lahore, Kasur, Sialkot, Jhelum, Bahawalpur, Layyah, Multan, Vehari, Rahim Yar Khan, Gujranwala, Dera Ghazi Khan and Rajanpur were added to it. The forms can be submitted up to December 21, along with Rs250 registration fee. Over 150,000 application forms were downloaded in the first two days. However, concern over missing details has slowed down the process. Some of the questions that arise include: will state land be available free of cost and if so, what would stop wealthy investors from becoming party to the scheme either before construction or afterwards by purchasing the units and selling them at market rather than subsidized rates? The House Building Finance Corporation, the only main lender for house building is almost defunct and its revival needs money, but the government is not willing to spend money from its own pocket. Domestic banks will also be wary of lending to the scheme, especially as the poor have no collateral.


It is also not known whether the housing authority will be empowered to ensure that loans are available to prospective buyers and, if so, at what rate? The market rate, which is extremely high or at a subsidised rate and if so, who would bear the cost differential? Which agency will be empowered to ensure the quality of the houses? How will each unit be priced as the cost would differ due to the location of the unit? Will the NADRA, or data to be collected from Katchi Abadis, will determine the beneficiaries? Or the Benazir Income Support Programme, the more appropriate forum, as it has identified the beneficiaries scientifically and to the satisfaction of multilaterals, who are engaged in investing in its expanding programmes? Katchi Abadi residents include those who have encroached upon state land and those who rent units to the poor and it will be necessary to distinguish between owners and the poor in allocating the units.


According to a report by the Asian Coalition of Housing Rights, Pakistan faces a shortage of 8.5m housing units, with urban demand rising to 350,000 units every year. The housing shortage, especially for the poor and working classes, is met by Katchi Abadis or informal settlements. In many cases, the land mafia profits from grabbing state land and creating slums, in which they sell or lease out houses to lower-income groups. In fact, much of the existing housing lacks even basic necessities. Successive governments have neglected the housing issue, especially affordable housing for the poor, and the crisis has worsened. Experts say a serious effort is needed for urban land reform. Shortage of housing units in urban areas, especially for low-income segments of society, has been an important issue for a long time. It has resulted in mushroom growth of slums in cities. In big cities like Karachi, Lahore and Islamabad, hundreds of thousands of people are living in slums. In the absence of government schemes, the private sector has monopolized the housing sector. Housing societies and real estate is one of the biggest businesses in the country. Except for few, most of the housing societies have failed to deliver what they promised to people. There are thousands of illegal housing societies, where the general public has invested hundreds of billions of rupees from their hard-earned income.

According to a report submitted by the government in the Supreme Court few weeks ago, there are more than 6,000 illegal housing societies in the country. The unchecked growth continued over the past three decades. Transparency should be the most important component in the newly-launched project. The government needs to make sure that the maximum number of deserving people is accommodated in it. The real task will be its fair execution where genuinely eligible families get a roof over their heads, instead of investors.


Experts say it is an ambitious scheme which has set unrealistic targets. It is estimated that the cost of construction of a single house will be between Rs2m and Rs5m. The government said that mortgage would be available for the houses, where downpayment (or equity) will be 10 percent. It means the cost of construction of one million houses in the first year (assuming the construction is spread equally over five years), will be around Rs2 trillion, which is almost half of the total tax revenue of the country. Ten percent of the amount, which is Rs200 billion, is expected to be provided by potential homeowners, while debt of around Rs1.8 trillion needs to be raised in the first year. At a policy rate of 8.5 percent, with the borrower paying back mortgage over 20 years, the monthly installment for a basic household unit comes to around PKR15,600 – which is almost equivalent to the minimum wage in the country.


In view of the ground realities, experts fear the government will not be able to complete the housing project. If completed, the poor will not be able to benefit from it. They say the government only wanted to divert the public attention from rising prices and other issues to gain time to settle. However, it will still be a great achievement if the government completes even 10pc of the project in five years and even 10pc poor people benefit from it.