Feb 28 - Mar 6, 20

The outburst of Katchi Abadis has become a cause of grave concern, not only because these localities are short of civic amenities but also they harbor outlaws. One of the reasons for the mushroom growth of these dwellings is prohibitively expensive housing units. Around the world ample housing finance facilities are offered, which keeps the local construction industries vibrant. However, Pakistan has failed in creating companies specializing in housing finance. One of the reasons for the dismal prevailing condition is colossal rate being charged on housing finance. Till recently, one public sector company was providing loans for the construction as well as renovation of housing units. However, hike in interest rate resulted in its delinquencies and its survival came at stake. The entity may have survived the shock but has certainly rendered incapable of meeting demand of the whole country. Therefore, there is an urgent need to make it a vibrant player once again.

A vibrant construction industry supports about three dozen other industries i.e. tiles, sanitary fittings, iron and steel, cement being some of the biggest beneficiaries. Construction industry directly competes with gold and stock market but poor law and order situation and emergence of 'Qabza Mafia' has kept the investors away from investing in housing units. Ironically, rents have not increased in tandem with the rising cost of housing units.

On top of this, prices of housing units suffer from cyclic movement in price. With regular intervals, there have been booms and depressions in the prices of housing units. However, bulk of the investment is made in open plots rather than ready to occupy units. Surprisingly, the most expensive housing units/plots are sold and purchased on 'Power of Attorney'. Since the title is not clean financial institutions are not ready to finance purchase of such units.

According to some experts, most of the investors using this option are not willing to show on government record that they own any immoveable property. This may be because they cannot establish source of their income. They also do not wish to record their name in any sale deed to avoid payment of stamp duty and tax on capital gains.

Investment in gold is often preferred over real estate because no document is prepared for sale and purchase. Introduction of ten tola bars (TTBs) with quality certification has become a preferred choice of the investors. Firstly, taking care of TTBs is much easier and secondly over the last three years gold prices have been on the rise.

Though, very scanty details about the import of gold is available, industry experts say more than 500 tons gold is sold/purchased in the country as against an official import of less than 200 tons. Bulk of the TTBs is carried personally by people arriving from the Middle East. The awareness about the benefits of carrying TTBs developed after India allowed every Indian returning home to carry one TTB without paying ant duty.

Comparing investment in gold with housing units in a way is to encourage the investors to invest in gold. The objective is to provide incentive for investment in housing units, making the transfer of ownership easier and withdrawing stamp duty charged on the transfer of ownership. However, this question will arise only once owning a house become affordable for the masses. The top item on the agenda should be to bring the interest rate of loans acquired for the purchase/construction/renovation down to single digit.

According to some experts, cost of housing units can be brought down by containing rise in cost of construction. Hike in cement and steel prices (mainly due to persistent rise in coal prices), government is not auctioning new flat sites, and delay in handing over possession is due to builders overstretching themselves. The focus of builders has shifted away from the low cost housing units to condominiums. The added advantage of this shift is tons of cash inflow and clients often making bulk payments rather than monthly installments demanded by those seeking booking in low and medium cost housing units.

According to an analyst, tons on money are coming into Pakistan as home remittances but little is diverted to new housing units. However, a real estate agent has a different story to tell that those getting remittances are not keen in booking an apartment and then waiting for month/years to move into the new houses. Most of the families prefer to buy ready to occupy housing unit.

Another real estate agent says those living in stand alone housing units are selling their houses and moving into the apartments due to security concerns. Since these houses are mostly sold to the builders, sellers often fetch handsome money, sufficient to buy couple of high cost apartments.

All these may be the signs of Pakistani getting richer but the fact is that gap between haves and have-nots is widening, also evident from unabated proliferation of katchi abadis.

Pakistanis need millions of new housing units every year and backlog is increasing fast. There is an urgent need to facilitate construction of low and medium cost housing units.

Mushroom growth of katchi abadis gives birth to other problems i.e. inadequate supply of drinking water, disposal of effluent, overcrowded public transport, and traffic jams on main arteries. Karachi is the best example of this unplanned growth, having a population of about 20 million or 10 per cent of Pakistan's population but little development budget. The available amount is not even sufficient to maintain the available facilities.