Pakistan’s low-cost housing needs — by Syed Mohammad Ali

In big metropolitan cities like Karachi and Lahore, housing projects often get started with little idea of urban planning to link them with roads and the required infrastructure. Unless these processes begin to take place simultaneously, new housing developments will continue to quickly turn into urban slums or ghettos

While there is an across-the-board housing shortage in Pakistan, focus on lodging needs for lower income families is of particular importance. However, building homes for the poor can be a real challenge in the absence of enabling policies, as is the case in our own country.

It is estimated that while the annual demand of housing in the country is for 1.5 million units, we are constructing only 0.6 million units. Moreover, the homes being built are not spacious enough. Consider, for instance, the fact that while the international room occupancy is 3.4 persons, it is 6.7 persons in Pakistan. Moreover, with fast growing urbanisation, major cities like Karachi and Lahore will see more than a 20 percent rise in housing demand over the next two decades.

There is an infrastructure and housing finance department within the State Bank, but it has not been able to keep up with the overall national housing demand. According to some recent estimates, Pakistan already faces a shortage of 8.8 million units. But there is a dearth of specific data on varying housing needs across the country. The World Bank has recently launched a portal called the South Asia Housing Finance Forum to encourage housing development in the region, and to attract more investment for this purpose.

The State Bank is to establish a mortgage refinancing company with the help of the World Bank and International Finance Corporation (IFC). The IFC has, in fact, been trying to develop a mortgage market in Pakistan since 2005. It focuses on building the capacity of private, commercial sector banks in how to lend mortgage loans to bring liquidity into the sector. Yet, with the enforcement of more stringent recovery rules in general, most banks have reduced disbursement of long-term loans, hampering the flow of investment capital in the housing sector. The terms set by commercial banks and financial organisations to buy and construct a house remain virtually impossible to meet.

An action group formed by the Acumen Fund aims to better inform government and regulatory bodies, as well as private sector players interested in low-income housing. Considering the high cost of capital in the current interest rate environment, it is being argued that targeted interest rate subsidies should be provided to help capitalise the housing finance earmarked specifically for low-income housing. Requiring banks to earmark a portion of their portfolio for low-income housing finance can be a course that the State Bank of Pakistan may consider to catalyse innovative models to broaden the access of low-income groups to housing finance.

But trying to provide credit or to encourage more investment is not sufficient to address the housing challenges in Pakistan. Other problems related to developing low-income housing include the provision of clean title and preventing land speculation. The availability of land, either public or private, at affordable rates and with clear title is actually one of the biggest bottlenecks for low-income housing. One possible solution identified to overcome this issue is the creation of a land bank facility specifically dedicated to promoting low-cost housing. The other issues that merit attention in this regard are stamp duties and title registration fees, which could be brought down significantly particularly for low-income housing projects.

Even if the cost of construction and the purchase price of housing can be brought down, there will be a need for the provincial and local governments to become more proactive in delivering relevant infrastructure such as electricity, clean water, and sanitation services. Yet, there remains a severe lack of serviced land with access to basic amenities. In big metropolitan cities like Karachi and Lahore, housing projects often get started with little idea of urban planning to link them with roads and the required infrastructure. Unless these processes begin to take place simultaneously, new housing developments will continue to quickly turn into urban slums or ghettos.

Recently, there has been evidence of some innovative thinking on the ground. The Aga Khan Development Network and the First Micro Finance Bank of Pakistan have designed some innovate programmes to provide needs-based housing finance for both structural (for seismic-resistant construction for instance) and non-structural improvements to the houses of poor people. For non-structural improvements, these programmes are trying to provide a range of products and services, including the installation of fuel-efficient stoves, ventilation and insulation systems. Products like smoke-free stoves can reduce domestic biomass needs by over 50 percent while also helping to reduce acute respiratory infections due to smoke and cold. Other products being designed with similar objectives, like roof hatches, can improve light and ventilation. Water warming systems ease domestic chores primarily done by women, while saving fuel and reducing exposure to cold temperatures. Floor insulation warms up traditional house floors and allows for more comfortable sitting and sleeping, especially in mountainous regions. These housing finance programmes are going to be piloted in Gilgit-Baltistan and Chitral during the current year, and can later be launched in other areas in the future.

Some other entities like the Kashf Home Improvement Loan Programme and Tameer Microfinance Bank are also thinking of introducing financial services. However, a word of caution is needed here. Keeping interest rates to a minimum has remained a challenge for the more conventional micro-lending schemes. Thus, these new entrants to the sector must try to introduce varied housing finance models (do-it-yourself housing development, requiring short-term funding or long-term mortgages, and with or without assistance), with varying interest rates, which can cater to localised needs and preferences. Also, providing money to purchase land, instead of only providing money for house building would be another interesting issue to consider, especially in the rural areas where people do not own their homestead, which enables their exploitation by feudal elements.

Such out-of-the-box thinking must be given due attention by state authorities and our international donors for potential replication on a wider scale to ensure that a greater proportion of poorer people have more money left in their pockets each month to cater to other familial needs, besides paying for their accommodation costs, while at the same time being able to enjoy the security of having their own roof over their heads.

The writer is a researcher. He can be contacted at

Source: Daily Times



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