Soon after coming to power, Prime Minister Imran Khan announced his 5 million housing scheme. It was an ambitious programme but welcome in view of the acute housing shortage in the country. The country currently suffers from a shortage of nine million housing units, with the deficit growing by an estimated 0.7 million units per year.

Worse still, Pakistan has one of the highest people-per-room ratios of 3.5 in the world. According to the Association of Builders and Developers chairman, the situation is particularly alarming in the urban areas, where slums have become commonplace. About 12 percent of the population in the country owns 56 percent of the housing stock, leaving only 44 percent for the remaining 88 percent. Whatever construction activities are going on, they are focused on the rich and the super-rich, with only a few catering for the middle classes. Housing for the poor seems nobody’s concern.

According to media reports, progress is being made slowly to put the government’s housing scheme on the ground. Some land has been acquired, while some projects have been formulated. But there is no information yet about the financing side of it, and how the Naya Pakistan Housing Program (NPHP) will actually work. Needless to say, no housing market can be developed without a mortgage financing system in its support. As is the practice all over the world, to encourage home ownership, short and long-term financing services must be available to buyers. It may be recalled here that last year, the State Bank of Pakistan (SBP) came out with a comprehensive policy to promote low-income housing finance in the country. The SBP identified various demand and supply side issues hindering housing finance such as weak contract enforcement, uncertainty of titles, maturity mismatch, unaffordability, etc.

Lately, some progress has been made towards easing the finance shortage in the housing sector. According to the State Bank of Pakistan, 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 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. The House Building Finance Company holds the largest share (22pc) in terms of outstanding home loans. Category-wise, Islamic banks remained the largest players with a 39 percent share in outstanding loans.

To remove the financial hurdles, the central bank some time back proposed subsidised financing facilities for home buyers as well as builders. The tenure for the loans was 12.5 years, while 50 percent of the loan was to be given at 5 percent (with banks’ premium of 4 percent) by the SBP and the rest of the loan was to come from financial institutions at a fixed rate of 12 percent. Thus, the average rate became 8.5 percent for the entirety of the loan. Moreover, the policy proposed that government land earmarked for low-income housing could be given to developers free-of-cost for 50 percent houses and apartments in the low-income category. Later, the SBP came out with a new policy which redefined low-income housing as a unit costing Rs3 million for a loan size up to Rs2.7 million and no income level identifier. As of now, under this policy, the government is reported to have decided to subsidise special segments of the population, including widows, children of martyrs, special persons, transgenders and persons in areas severely affected by terrorism.

In this context, it may be added here that the Pakistan Mortgage Refinance Company (PMRC) has been given $140 million by the World Bank for low-income housing. The PMRC has signed agreements worth Rs4.8 billion with the House Building Finance Company (HBFC), Askari Commercial Bank, First Women Bank, Bank Islami and Khushali Microfinance Bank. If all houses cost Rs1 million, and the loan to value is 90 percent, this refinancing would cover about 5,500 loans. The product is at fixed rate mortgage of 12 percent and has a tenure of 20 years.

Given the ground situation, experts are of the opinion that the 5 million house construction is too ambitious to materialise in the near future. But if it is conjoined with the PMRC facility, quicker results can be achieved. For, as loans are disbursed and payments are made, more loans can be given with a rolling effect. All said, to make a success of it, the 5 million housing programme needs to be widely publicised and elaborated in all its details for the stakeholders. Given the sheer size of the plan, the government needs to produce a detailed document outlining how, where and when housing will be provided. The programme needs to be placed in the context of the larger urban planning framework so that there is no duplication and wastage of resources.

Developing the housing market is a big challenge which cannot be overcome through indigenous resources alone. In view of this, the government should try to find international partners for financial and technical support.