NEED OF HOUSING FINANCE
OWNING A HOUSE REMAINS A DREAM IN PAKISTAN WITH LESS THAN $1,500 PER CAPITA INCOME.
SHABBIR H. KAZMI
July 2 - 8, 2012
There cannot be two opinions about importance of housing finance. Not only it enables people at large to own a house but more importantly, it also keeps construction business vibrant. Experts are of the opinion that operations of more than 50 different industries are directly or indirectly dependent on construction industry. The prominent among these are cement, iron and steel, sanitary ware, electrical appliances, aluminum and woodcrafts.
According to certain estimates, Pakistan faces shortage of 10 million housing units at least. While the rich could still live without housing finance, middle and lower middle class finds it almost impossible to buy a housing units at full cash payment. This is evident from the fact that less than 100,000 people are being catered by the country's only housing finance company. Therefore, a new strategy has to be carved with the help of all the stakeholders.
The government of Pakistan (GoP) has to play a lead role by coming up with a 'Housing Policy' envisaging areas like 1) creation of housing fund with the help of international donors for the extension of loans at not more than five per cent interest per annum, 2) open auction of plots for housing schemes/flat sites, 3) strict monitoring of builders and developers for ensuring quality of construction and handing over possession within stipulated time, 4) supply of utilities and 5) construction of infrastructure.
Let one point be very clear that construction of skyscrapers within the city and proliferation of slums create many problems from lack of supporting infrastructure to very high population density and from ethnic concentration to human shields. Most of Pashtuns are law-abiding citizens but often militants develop their safe sanctuaries in Pashtun areas and often use the residents as human shield.
Over congestion even in the newer localities is because of not making appropriate provision for car parking, violation of building control bylaws, and encroachments. Since shops costs are skyrocketing, vendors occupy open space in front of residential and commercial buildings, which soon become source of income for the booty collectors. It is on record that despite construction of flyovers and underpasses in Karachi, traffic jams become normal. Only the civic authorities can be held responsible for this, which have become subservient to booty collectors.
Be they dwellings of low-income groups or posh localities, all of them suffer from two contentious issues: 1) shortage of drinking water and 2) overflowing sewerage water. This problem exists because of 'tanker mafia', which pilfers water from the lines and then sells it to people. When Mustafa Kamal was Nazim, broad diameter lines were laid throughout the city. These lines are there but mostly without water.
Another issue of vertical and horizontal expansion of Karachi is overloaded buses and worst traffic jams during peak hours. Due to acute shortage and highly depleted condition of public transport, people are forced to use two and four wheelers, which add pollution and erode foreign exchange reserves due to rising import of motor gasoline.
House building finance company limited (HBFCL) incorporated on June 13, 2006 has taken over all assets, running business, contracts, liabilities and proceedings of the HBFCL, established in 1952 under the House Building Finance Corporation Act 1952. Reportedly to date HBFC has financed around 456,256 units and extended Rs47.82 billion and successfully recovered Rs64 billion (inclusive of markup). At present, it has a housing finance portfolio of Rs14.6 billion and handles over less than 80,000 operative accounts with a workforce comprising of around 1,000 officers and support staff.
Lately, speaking at a conference, Azhar A. Jaffri, Chief Executive Officer of HBFC said, "Real estate, housing and construction industry plays a vital role in development of the economy of a country and provides employment opportunity to millions and affordable housing units to people of Pakistan". He also said by resolving the challenges facing the housing and construction industry, impetus could also be provided to more than 60 allied industries linked with construction industry.
In order to address the burgeoning housing shortage in the country, it is essential that key players, builders, and housing finance companies should join hands and work together to address the challenges faced by the housing sector.
The country not only has a population of nearly 200 million but also the highest population growth rate in the South Asian region. The country is ranked 6th most populous country in the world. This housing shortage is getting acuter because of continuous and large-scale migration of rural population to the cities, in search of livelihood and better opportunities. The urban areas are thus in a crisis-like situation, especially for low and middle income groups, leading to a steady spread of slums and 'katchi-abadis'.
Urban growth is a result of a combination of factors namely geographical location, natural population growth, rural-to-urban migration, infrastructure development, national policies, corporate strategies, and other major political, social and economic forces. Keeping in view the rapid urbanization of population, the need for the government and financial institutions to respond adequately and timely to this resultant increase in demand is critical.
There are a number of factors responsible for this burgeoning housing issue. Items of top of the list are high cost and non-affordability, lack of housing finance, wrongful usage of plots essentially meant for low income groups and cumbersome procedures for obtaining loans, which leads to corruption.
According to a report there are approximately 10 urban centers in Pakistan with Karachi and Lahore being the two biggest centers. Both these cities alone constitute the largest population of the total population of these centers. A report titled, State of the World's Cities 2008/2009, by UNHABITAT, estimates that the population in these cities will collectively grow at the rate of 30 per cent between 2010 and 2020. Out of this highly concentrated urbanization trend, over 45 per cent of the total urban population is believed to be living in slums. This high concentration of slum households can be associated with a variety of factors including lack of investment in infrastructure, housing sector, poverty and instability.