Low cost housing
The issue of low cost housing is a long standing one but has not been taken seriously by any government. Land prices have gone so high that middle and low income cannot dream of owning a house. In the last federal budget it was announced that the government would provide 0.5 million housing units to the low-income group. Under the programme, the government was to set up 1,000 residential colonies with 500 units each across the country. Over 50 million people were expected to benefit from the scheme. Each unit would cost Rs1 million and the government would take necessary steps to engage banks and other lending institutions to provide loans for these units. The government would pay the interest whereas the remaining amount will be paid by home buyers in instalments. Since the announcement no progress has been made towards putting the plan on the ground.
According to a recent survey, 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 Chairman of Association of Builders & Developers, 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.
One way to promote low cost housing is for the government to play the role of a facilitator by supplying land and providing credit to both developers and individuals and lowering transaction costs. The government can also initiate measures to upgrade infrastructure facilities and reduce transaction fees. One of the fundamental constraints to own a house is generally a lack of required funds, which could be generated either by raising own resources or borrowings from the banks. While mortgage finance is quite common in developed countries, Pakistani banks follow a restrictive policy in this regard.
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 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 lowincome segments of society. The reasons for sluggishness in the growth of 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 real estate sector.