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Naya Pakistan – A real vision for low-cost dwellings

Naya Pakistan Main Naya Ghar

In Pakistan, more than 50% of masses living below the poverty level who cannot even think of purchasing a plot or katcha house. The increased prices in housing sectors has indulged most of the middle income class people to live on rent. 10% of upper middle class can afford to purchase plots or house or flats at their desired place. 15% of average middle class can purchase plots or house or flats at a better place but not on a prime location. Most of them would prefer to purchase on installments so that they may arrange the cash to pay off the price. Approximately, there are only 5-10% of the population who are able to purchase a property. Just imagine, more than 50 % of Karachi population is living in Katchi Abadi.

Prices of the land have increased at higher pace from the last decade, which is evident from the fact that the property that could have been acquired at Rs. 1 million, has now been increased by around 200% to 300%. Since the economic conditions of the country which is under tremendous pressure due to the current account deficit and debt financing which pushes the government to impose more indirect taxes in order to lower down its deficit and to comply with terms of the financer. Such trend increases the prices of the consumer products which badly impact their monthly budget which bring down their affordability to a lower extent. The construction cost today is almost double the cost of what was a decade ago. There are many imported items involved in the construction and the declining value of Pakistani currency against the dollar from the last decade has almost doubled the construction cost. Further, increasing regulatory duties and taxes escalated the material cost involved in the construction industry has adversely effected this industry. The rising cost also causes the developer to increase its sales value which in turn makes life difficult for the person who is willing to purchase his home.

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The shortage of housing, especially for the lower and middle-income groups, is a pressing matter for the country. There is a shortfall of over 10 million houses. Construction industry depends on the availability of transport infrastructure, provision of utilities and mortgage financing. All these facilities are always available in city areas but due to the lack of commitment shown by the previous governments we are way behind from the desired results. The new government is committed to addressing this extremely important matter, which should not only be beneficial for the social fabric, but also in terms of boosting economic activity for a multitude of industries, as well as for creating jobs at all levels. However, the current progress seems to be very slow keeping in view the targeted date and the number of units to be constructed. The biggest challenge is to identify the land and its acquisition especially in Sindh after 18th amendments where the different governments rule the province.

Establishment of Naya Pakistan Housing Authority has almost completed while financing model for purchasing of homes and work on associated tax exemptions is also near to completion. The construction work on 25,000 housing units at the federal level in Lahore and Islamabad will be started soon while in Punjab it will be started at Renala Khurd, Chistian and Lodhran soon.

Government do not have adequate development fund to finance such huge numbers of housing units in Pakistan in 4 to 5 years. Government alone cannot serve this issue. In fact, government is obtaining loan from different countries to serve their markup on debt. There is a need to take some serious deliberation to form Public Private Partnership to achieve this target. They may include Association of Builders and Developers (ABAD), local and international builders and developers and accommodate them by providing land on concessional rates preferably on installments. Government should remove constraints on the development of local building materials and construction methods. PTI government shall facilitate mortgage financing upto 30 to 35 years period enabling easy repayment installments. By providing long term loans we would enhance the number of people who can afford housing by huge numbers. Infact, people living on rental properties would opt this option and huge number of population can be benefitted from it. Further, project loans may also be provided to renowned builders at nominal rates so that the overall cost for the allottee will be reduced.

To improve availability of finances for infrastructure development, housing experts suggest flotation of tax exempted municipal bonds. In developed economies, municipal bodies are encouraged to raise funds for building schools, highways, hospitals and sewer systems. Since Pakistan is a federation, the reforms must be undertaken by the provincial governments.

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The low-cost housing project can only succeed over a period of time through collaborative effort. International institutions like the World Bank and Asian Development Bank can extend a helping hand. This initiative will also help us for creating millions of jobs as more than 45 industries are directly link with real estate industry which will enhance the related capacities and one to two hundred thousand jobs in the service industry that is banking, security, maintenance, insurance etc. However, the job opportunities near the newly build constructed areas and arranging funds for housing needs are the biggest challenge. There is a serious need to convince commercial banks to lend 10% of their loan portfolio to the builders and housing mortgage financing and establishment of remortgage finance market. Currently it is just 0.5% in comparison to UK & USA which is 69% and 75% respectively. It is pertinent to mention here that, in Pakistan Average Family size is 6 person as compared to USA 2.54 and UK 2.3 person per family. Another important factor about of the number of persons living in a single room is 3.5 per room in Pakistan as compared to 0.5 and 0.4 at UK and USA respectively.

Revenue department is always been an integral part for any government, all over the world the share of immovable properties in taxes ranges from 1% to 4.8% however, Pakistan is far behind from such share as it only contributes 0.4% taxes to the national exchequer which is a near to zero share to the GDP. The conversion of 30 years to 99 years lease will generate revenue for the government.

 

Further, a lot of population already living on 30 years lease hold land. Government can make Regularization Policy/schemes to include it in their 5 million housing program. Further, there are a lot of mining lease area wherein encroachers constructed their houses. Again, there is a serious need to convert this type of mining lease land into residential title land to cater the need of the people especially in urban areas.

In 2015, the Indian Prime Minister had also launched a scheme called “Housing for All by 2022” for those living in urban areas. This scheme is projected to build 12 million houses by 2022. However, the progress of PMAY (U) has been slow. According to available data, only about 10 per cent of the projected number of houses have been completed. Further, in 2016, Indian Prime Minister Narendra Modi launched the Pradhan Mantri Awas Yojana (PMAY) – Gramin with the aim to build 10.2 million houses in rural areas by 2019. However, it seems that they are unable to achieve the target. I think our government shall also look into it and try to address the problems / challenges faced by them so as to achieve maximum possible target.

Last year, ABAD has taken an initiative to launch the low cost housing scheme for the middle and lower class income people. They had offered a total of 20,000 units of 120 Sq. Yds each at a price of Rs. 1.5 million. This offer was overwhelmed by the people which depicts that there is actual need of low cost housing units in Pakistan. Recently, Malir Development Authority (MDA) has launched housing scheme at Taiser Town Scheme-45. The scheme will allow people to get ownership of plots ranging from 80 square yards to 400 square yards by taking part in a process of balloting. MDA has set the price for 80 Sq Yds plot at Rs. 80,000, 120 Sq. Yds plot at Rs. 120,000, 240 Sq. Yds plot at Rs. 528,000 and for 400 Sq. Yds. plot at Rs. 1.2 million. Such initiative from the Government of Sindh has been welcomed by the Karachiites as according to the sources more than 500,000 forms have already been sold out which clearly indicates a overwhelming response however, the early scheme launched in the year 2004 shows a very disappointing sight for the allottees of that project as the infrastructure and development work which was carried out their was a very poor one. Sewerage lines, road, water lines are dampened due to the lack of interest shown by the official of Malir Development Authority. Apparently, it seems that there is a huge demand for low cost housing scheme and people are willing to invest despite of poor track record of MDA.

We hope and pray that Naya Pakistan would be able to address this basic need and provide shelters to every Pakistani which is their constitutional right.

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