The Lahore Development Authority governing body on
16th December 2002 reportedly approved a housing scheme for low-income
groups that will be situated adjacent to the LDA scheme for the
government employees, on Raiwind Road and will comprise 2,000 three- and
five-marla plots. The body decided to invite applications for allotment
of plots in the low-income groups housing schemes in February next. It
was also decided to create a separate setup for developing the scheme
for overseas Pakistanis and receiving applications from them. LDA
initiatives for developing new housing schemes are timely. However, in
view of the shortage of houses in the low-income segment of society, LDA
and other similar development authorities are urged to take up more such
schemes in future.
The State Bank of Pakistan organized a seminar on
housing at Karachi on Dec.11-12, 2002. Many stakeholders participated
and a number of papers highlighting different aspects of housing
including problems and bottlenecks were read. The Prime Minister's
Advisor for Finance inaugurated the seminar. He highlighted the need for
building new houses and the impact that construction of houses shall
have on industry, employment generation and poverty reduction. The
efforts on the part of the government and the SBP are appreciated.
However, many practical steps are needed, including suitable amendments
in the relevant laws to make the legal framework conducive and for
liberalizing policy for allocating suitable land particularly for the
low-income people. There was discussion on opportunities to mortgage
financiers on the one part and the construction industry on the other;
however, more attention should also have been given to the ways and
means for provision of houses to the low-income groups, who may not be
eligible for bank loans under the traditional rules of housing finance.
At the end of the seminar, the SBP governor
reportedly set up a task force to finalize recommendations for
submission to the government for consideration. The suggestions
contained in this article would assist the task force in the assignment
particularly the housing for the poor and the destitute, whose needs
deserve greater attention at all levels.
Housing backlog started developing on independence.
Inflow of refugees could not be accommodated in the available stock of
houses. Efforts to provide modest houses started from Karachi that was
gradually extended to other parts of Pakistan. However, scope of this
initiative was too small to cope with the housing shortage. As time
passed, the vested interests made the construction of houses more
difficult. Because of the problems with the tenants and the rent cases,
the well-to-do people chose only to build a better and larger house for
the family. Moreover, there were procedural delays and high transfer /
registration fees. All this raised construction cost up to 10-20 %.
A small segment of the society that has regular
employment and reasonable monthly cash inflow can easily borrow for
building a house. According to a World Bank report nearly one-third of
population in Pakistan is below the poverty line. The poor people, if
they do not own a house already, have little chance of building a house
for them in normal ways. For the poor and the destitute, it is
impossible to build a house with money borrowed from HBFC or private
commercial banks, as they do not have the 'equity' to show to the banks
for loan eligibility. For all borrowers, the fear of ejectment is ever
present, more so now due to uncertainty of employment and the tightening
of the loan recovery laws.
According to Population and Housing census, due to
negligence in the past, the housing backlog had reached up to over 4.3
million units by 1998. The annual additional requirement of housing
estimated at 270,000 units, makes the backlog as 5.38 million housing
units today. It is felt that due to gradual disintegration of joint
family system in most of the areas in Pakistan, the actual backlog may
be higher. The World Bank's recent estimates place Pakistan's population
at 155 million in 2002, as the country failed to reduce the birth rate,
which at present is 2.5 %. Of the total population, 32.6% is living
below the poverty line with per head income of $420 (Rs 25, 000) per
annum. Due to higher birth rates, the need for new houses each year is
going to be much higher in the coming years. For effectively tackling
housing shortages, birth rate has to be brought down considerably.
The target of building of 500,000 new houses each
year is a tall order. Special measures are required for arranging the
finances particularly for the low-income people. The stakeholders and
the well-to-do people should join hands for building modest housing
units, using economical building techniques and local construction
materials coupled with remedial steps for improving legal, procedural
and administrative framework, as under:
a. The government may introduce house-building loans
for all its employees for constructing modest houses. The facility to be
available at all levels and ranks. All other authorities and
institutions may also be asked to provide or arrange similar facilities,
if not already done.
b. Rent laws may be reviewed and made conducive for
the construction of more houses for renting out purposes. Court cases
may be settled within maximum 30 days of filing of the case. Housing
sector will then attract large investment from local and Pakistani
expatriates and it will afford big opportunity to people who wish to
have regular rental income. Part of the bank deposits may also be
channeled to houses construction.
c. Property registration process may be simplified
ensuring its completion in a few days. As most of the people are not
educated, people may be protected against frauds and cheating.
d. The fees for property transfer registration may be
reduced substantially. In many places, the civic authorities collect
their own fees in addition to fees levied by the revenue authorities.
All fees combined should not be more than one per cent of the cost of
e. Austerity measures may be introduced at all levels
in the nation. In the construction of houses, the functional utility
should matter most. There may be certain upper limits of covered area
beyond which the creditors may not finance. For the sake of argument let
us say 2000 sqft should be the upper limit for any self-occupied house.
This would spread the available credit amount for building of more
houses. It may be declared that instead of building a posh house, the
families should, using the same amount of money, build a modest house
for self-use and a small house for renting purpose.
f. For different plot sizes, construction designs may
be standardized. For each size and location 3-5 designs may be prepared
keeping in view the socio-cultural values of the people. The house
owners should have the choice to adopt a standard design and inform
about it to the civic authorities for record.
g. The development authorities / civic authorities
all over the country may be required to develop residential plots
particularly for the low income people. The utility companies may be
bound to provide connection to the authorized housing societies on
priority basis. It has been reported that the federal government has
recently stressed the urgency of the revival of housing construction and
passed instructions for taking appropriate measurers.
h. The government may develop education, health,
water, sanitation facilities, etc. for these new housing societies using
own funds supplemented by funds from different international and local
donors. This would ensure provision of healthy atmosphere for
All classes and segments of society will benefit from
these measures, which would also enhance their saving and buying
capabilities. In the improved legal framework scenario, the people with
money and ability to borrow from the banks would readily go for
construction of houses, both for self-occupation as well as for renting
out purposes. There will be vast opportunities for construction
industries as well.
The measure listed above and implemented sincerely
would, in the absence of further special measures, be less beneficial to
the low-income people. These people are not so luckily placed. They do
not have the capacity of self-financing or the capability to take a bank
loan for the purpose. They are very much part of the Pakistani nation
and must be supported. They would be able to become part of our society
after they own houses, which are a pre-requisite for development of
proper frame of mind as to civic sense and other responsibilities. We as
a nation have to think out how best to provide opportunity of owning a
house to each one of them. These people would not expect charity. The
following approach may help them an opportunity to have a house of their
The development authorities / civic authorities may specially earmark
land for housing societies of low-income people. The plots of land might
be allotted on receiving of a small down payment. The balance amount to
be paid in installments. Construction activity on the plots to be
started only after full payment has been made by the allotees to the
The government regularly receives loan / grant funds from the World
Bank, IMF, ADB and many other bilateral donors for poverty alleviation,
health, education and sanitation projects in the country. A substantial
part of these funds may be earmarked for developing civic and physical
infrastructure in the planned housing societies developed for the
Low-income people who already own plots of land may be offered interest
free construction loans from special funds contributed by the government
and supplemented by resources from the foreign donors. Three-marla plot
size and maximum 300sq.ft. covered area or similar such limit can be
prescribed for loan entitlement. Loan may be disbursed in installments
as per physical pre-determined construction milestones. The owners may
be allowed to contribute their equity by their labour to be utilized in
the construction of the houses.
Building engineers and other allied professionals may form bodies to
provide professional services to these people at nominal fees. Properly
designed and supervised houses will be stronger and look much better.
Failure of the house owners to timely servicing of the loan may not
normally result in foreclosures of the house immediately. They may be
allowed 2-3 years time to improve their finances and start servicing the
loan. The creditors may enhance their equity to the level of inflation
occurring in the meantime.
These house owners need to be provided skill training and offered micro
credit facilities by institutions such as the Micro-finance banks,
Khushhali Banks, etc. This way they would gradually join the mainstream
The government may encourage institutions such as construction industry,
builders, trusts, etc. to offer micro credit facility to these people
for enabling them build the houses.
The efforts of special fund set by the government can be supplemented by
other institutions / Corporations / authorities, both local and foreign,
who can help built houses in their special area of interest. Some of the
cases may be handled as under:
Large industries, oil / gas exploration companies, etc. may decide to
build small houses that are partly paid by the people though their
labour in the industry or the project concerned.
The specialized funds such as Zakat, Workers Welfare, etc. may chalk out
plans to encourage construction of houses to low-income segments of the
society in various parts of the country.
The bankers and other stakeholders are looking for
profitable opportunities in housing finance. For realizing reasonable
benefits they should help improve the legal and procedural framework for
the promotion of housing sector. This way all shall benefit.