What is required today is a new approach to the housing or let us say our concept or our relationship with the house has to undergo a change.

Feb 27 - Mar 05, 2006

Owning a house has always been considered a natural human desire the world over. Every one at one time or other would like to own a place which he or she can call entirely own. But as it happens this is not so easy. Economics, income bracket, social status and horde of other factors make it difficult for people to do so.

Why do people desire houses? A simple question which yet has a complex set of answers. The first answer which comes to mind is, to live in it of course. Yes, but a house does much more than that. It makes a social statement. It defines what social and income bracket one belongs to. It provides a psychological protection or a hedge, something akin to why women crave for gold.

What is the situation in Pakistan? We find that for most part, that right kind of housing is not available at right kind of prices for people to live in, as it is simply out of their price range. It is becoming increasingly difficult for them to afford a house that they would like to live in. What are the reasons for that. Recent years have witnessed a spate of speculative activity which alternatively has been blamed on a range of factors such as 9-11, Karachi situation, law and order in the country, lack of economic and industrial activity, tsunami, weather, you name it. Whatever the reasons have or have not been, the result has been that the price of land in major metropolitan areas of the country has simply rocketed into stratosphere.

Housing and real estate generally are considered as one of the economic engines of a country, for the very reason that so many allied industries are linked with it. Therefore, economic managers keep a close watch on the housing activity in the country and take various steps to provide initiatives so that the housing activities can pick up at the desired pace. This is done in tandem with the population growth rate in the country.

However, according to the general information available, the situation in Pakistan is somewhat different. There is, according to a data available, a yearly shortage taking place of roughly 250,000 housing units. Add this to the unaccounted population growth. The actual shortage could be much worse. This was recognized by our government and some noises in this regard were appropriately made by the right circles. However, as can be expected, the action on ground is yet to be taken or conceived.

What is required today is a new approach to the housing or let us say our concept or our relationship with the house has to undergo a change.

Let us take our generally accepted concept of owning a house. A typical cliche which is often heard regarding a house is that a man builds a house once in a life time. This somehow has come to be accepted as proverb. This is because, making or owning a house has become such a mammoth task, that it has generally been accepted to be an impossibility.

How does one come to acquire a house typically in Pakistan today. Well, the common practice is, by inheritance, when his parents or forefathers pass away, if he is lucky they may leave him with assets which may include a house or, which may include a house that can be disposed off to purchase or build a house. Secondly, if he is lucky enough to be married in a family where the bride may bring a plot of land or a house in dowry. Other than that it is just a stroke of luck, that, he may be in a profession, where over a lifetime he/she manages to accumulate enough funds where funds that he/she can build / acquire a house /abode that matches or suits the social strata that the person belongs to. It is well known for people to undertake long sojourns abroad to Middle East or other countries, toil hard in unthinkable conditions, pinch every penny, both literally and virtually, just so that they can bring home enough cash that can be converted into a house.

All this underlines how difficult it has become to acquire and own a decent living quarter in the country in current times. It has become simply a life time achievement. Something not dissimilar that Hollywood bestows upon its best achievers.

This should all change. Recent years have witnessed for the first time, entrance of financial institutions in Pakistan real estate market. But for some reason they have yet not been able to make the right connection with general market. And there are reasons for that. Banks are looking at a different market. The banks at the moment are using what Philip Kotler lovingly calls the market skimming technique. Just skimming the surface and charging a premium. Going for the big ticket and while defining their go and no go areas. This approach has basically restricted the finance to a very limited area of housing and has not created permeation to the general real estate industry. Hence, it has not created the ripple effect which our money managers and our beloved prime minister had envisioned.

What could be a new model for housing finance? In my view, it should be, what could be called a Starter Family house, something that would have say three bed rooms, one living room, kitchen etc. Something that could be housed in a 1500 sq ft, and comes with one small car port. This should be able to easily designed in roughly 5 marla plot. With current costs of land, in the outskirts of our major metropolitan areas, this could be constructed and financed easily in 20 and 25 lakh bracket. If properly managed, it could be done at a cost even less than that. This should be targeted at first time home buyers, people who would rather buy than rent, young professionals, with starting families, few children, may be one or two parents residing with them. Secondly, the wastage of space should be avoided. For some reasons, the idea of attached bath with each bed room has taken root in this country, which actually is a luxury, not a necessity. It reminds one of a Sardar Sahib (one wonders why most jokes revolve around Sardars), who wanted to have three swimming pools, one with warm water, one with cold water, and the third empty, for one when he did not want to have a swim. One should remember that bathrooms are actually the most expensive parts of a house to be constructed. With say 20 percent down, eighty percent could be financed. The idea behind all of this is that mortgage payments should be brought down to a level that they are close to rentals if not equal, for similar. This would provide incentives to the people to save and invest rather that pay rent.

This will give a new concept of owning a house ownership. It will no longer remain a life long achievement. The tenor would also decrease. One could own a house for a few years, build up some equity, and then sell it move on to a bigger and a better place. That is the way it has been happening in the West. It can happen here also. It would also alleviate some of our housing problems.