Oct 13 - 19, 2008

In an environment when investment climate in Pakistan is under severe strains because of security and economic concerns a good news has come from the Housing Sector that two foreign companies have signed memorandum of understanding (MoU) to construct 200,000 low cost houses/flats in major cities of Pakistan at a total cost of about over 3 billion US dollar.

The law and order situation was not satisfactory even earlier but the suicide attack at the five star Marriott Hotel last month has jolted the industrial sector specially the foreign visitors for business purposes. A leading businessman told this correspondent that all the five star hotels in the country were considered to be the safest places by the foreigners and Islamabad Marriott, because of strategic location, was on top of this list. The most devastated attack on this hotel killing over 60 persons and injuring over 200 including many foreign dignitaries besides destroying the hotel itself has completely shattered the confidence of foreign visitors.

He said that after the terror attack in Islamabad the foreign buyers of Pakistani goods and intending investors who were in Pakistan left by the first available flights while all intending visitors cancelled their travel programs.

As a consequence there was a complete fall on the business and trade front. In such a gloomy environment the news of two foreign construction companies resolve to invest in the Prime Minister Housing Project come as a pleasant surprise. M/s. Impro of Germany and Star Development Corporation of Canada signed last week MoUs with Pakistan Housing Authority to construct 200,000 low-cost houses/flats each in major cities of the country under the Prime Minister's housing scheme. Under the MoUs, these companies would initially invest $500 million in the mega project, and would later make an additional investment of two billion Euros.

Speaking at the MoUs signing ceremony, Federal Minister for Housing and Works, Rehmatullah Kakar has said that the government plans to build one million low-cost houses every year for low-paid federal government employees as well as the general public. He has invited local and foreign investors to invest in the mega project, as the government will extend maximum facilities to them. The mega housing project, the first to be launched by the Gilani government, is a commendable initiative to control the rising housing deficit in the country which has assumed crisis proportions, due largely to the skyrocketing land and construction material prices.

The new housing scheme dovetails with the PPP's slogan of "Roti, Kapra aur Makan". According to a World Bank study on housing backlog in Pakistan, the deficit has grown from merely 4.27 million housing units in 1998 to 61.9 million units in 2007, representing almost a 15-fold increase. This has put an almost unbearable strain on civic infrastructure in all major cities across the country.

For instance, the annual increase in Karachi's population because of different factors, including rural-urban migration, has ranged from 600,000 to 700,000 people, which has triggered both horizontal and vertical growth of the mega city. A related problem has been the mushrooming of slums whose number in Karachi has increased from 471 in 1984 to 1,482 in 2005. This shows the enormity of the problem. As a result the majority of the citizens have been forced to live in sub-human conditions, devoid of even the basic civic amenities.

A major cause of the housing shortage in Pakistan has been the widening mismatch between the additional annual need resulted in an annual backlog of 270,000 units. According to some projections, in view of the upward trend in urban population growth, Karachi's population, for instance, will grow to 20.6 million and Lahore's to 10.8 million by the year 2025. In fact this upward trend is discernible in all major urban centres of the country.

Low-quality housing and cramped living conditions for a majority of Pakistanis are interlinked national issues. It has been estimated by experts that over half of all housing units in the country consist of only one room, shared by an average family of around six persons! This provides a disturbing aspect of the dimensions of the problem. According to experts, a long-term solution to the problem is for the government to enact amendments to the outdated town planning and zonal laws to plug the loopholes that have cropped up in housing sector over the years.

Some experts have even suggested complete mapping of available housing land in the country, and the establishment of a consolidated housing bank to extend extremely soft-term finance for house construction. They have further proposed that the government should direct financial institutions to provide house construction loans, instead of house purchase loans, in order to revitalize the country's construction industry, which has a substantial share in the country's GDP.

The multi-billion project, launched under the Prime Minister's housing scheme for the poor, is a move in the right direction because it will address an important national issue. As promised by the housing minister, the government should expeditiously put together a lucrative package of incentives to attract local and foreign investors. There is a need also to control the steep upswing in steel and cement prices, which have been instrumental in raising the cost of construction in Pakistan. The upward trend in energy prices needs to be brought under control through appropriate measures by the government. And lastly, the government should ensure that the Prime Minister's low-cost housing project is complete strictly within the timeframe set for it.