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Five Million Houses Program: Could the Govt become guarantor for the mortgage payments?

Owning a house is a distant dream of millions of Pakistanis, particularly in the urban areas. Way back in 1970s, the general populace heard and believed the slogan of owning a house which according to many could not materialize since there are millions in Pakistan even today who live a life of a vagabond. In addition, there are millions who are compelled to pay the monthly house-rent which is by and large beyond their financial capacity.

There is pervasive hope across Pakistan these days regarding the promise by the incumbent premier for his five million houses initiative. This is probably the second time in the history of Pakistan, with the exception of some steps by the provinces for some housing schemes for the poor, that a premier himself is concerned regarding the provision of housing for the underprivileged of the country.

The whopping question and curiosity remain unanswered: why is it so that the financing sector has not really come forward to avail the great business opportunity of financing the housing sector over the period of last three decades, in particular? On the one hand, it is said that the banking sector has become acutely risk-averse, which is against the norms of its business. On the other hand, the government is blamed for doing nothing to promote the house financing in the country to address the ever-increasing housing backlog which recently has touched the unprecedented figure of eleven million housing units.

It is a pity that low-income housing sector customer has never been explored/catered to by the banking sector of Pakistan. The country with the burgeoning population growing at an average rate of 2.4 percent since 1998 offers a fascinating business opportunity for the banking sector in terms of housing finance for the millions of Pakistanis living in the outskirts, slums and even in the downtown areas of the urban Pakistan.

Is there any housing finance product for those who earn between Rs 50,000/- and Rs 70,000/- per month as salaried individuals. The answer is in negation since the banking sector does not find it safe to finance such individuals for a couple of reasons; one of them being no financial muscle to repay the mortgage.


According to a report of the State Bank of Pakistan, housing finance volume in Pakistan is 0.5 percent of GDP, which is lower than our neighboring countries. It is yet to see the benefits of a recent initiative by the State Bank of Pakistan titled ‘Policy for Promotion of Low-Cost Housing Finance’ which aims to provide cheap financing to solve the problem of housing shortage.

PAGE endeavored to ascertain whether a huge portion of population living in the urban areas earning between Rs 50,000/- and Rs 70,000/- per month could afford mortgage repayment if banks offer a product which may lead to fulfilling the dream of having one’s own house. Majority of the individuals were willing to avail a product if it is available. Individuals earning between Rs 50,000/- and Rs 70,000/- per month pay around Rs 10,000/- rent every month. Besides, they are able to save up to Rs5,000/- per month. It is mandatory to mention that the living standards of these individuals are squalid. There is no bank in Pakistan which is willing to cater to this market since this does not seem to be a viable business option along with the uncertainty of timely mortgage payment.

Is it possible for the incumbent government to come up with the notion of offering a housing product, with the help of the banking sector, to the class mentioned above? If an individual pays Rs 10,000/- per month for a housing product of two million rupees, he/she would be able to repay the amount in 200 months which is around 17 years. The government needs to help this population of the urban poor by paying the interest payment from its own kitty and being the guarantor as well. Further, the government needs to ensure that such low cost housing schemes do exist for which the incumbent government has to take initiative of asking the leading builders and realtors to come forward for this noble cause of helping the poor and solving the long-standing menace. This would be a win-win situation both for the government and the construction sector along with the 42 allied industries linked to the construction sector.

The World Bank may be one of the lenders to tackle the ever-growing housing backlog of Pakistan. In case the World Bank offers the wherewithal for this project at the cost of one percent, Pakistan government may find it significantly feasible to implement this notion.

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