Another sector that needs a lot of support in Pakistan.
Building a house
http://paktribune.com/news/index.php?id=11603
At least 65 per cent of Pakistani households have no hope of building a liveable pucca house in the near future if a shortfall of nearly five million proper housing units persists, says a World Bank report. This is a disaster in the making. It would lead to new slums in major cities, already a grave problem.
The Economic Survey of Pakistan wants some 500,000 housing units every year if the country is to overcome the shortfall in the next 20 years and avoid overcrowding in living conditions. Easier said than done.
World Bank consultants say in the current economic scenario, a part of economic revival depends on investment in housing sector: a significant avenue for bank financing and household investment and a factor in long-term economic growth.
Experts say an overwhelming majority of people are denied basic need of housing, as their means of livelihood and opportunities are limited. The continued migration of rural people to cities in search of jobs is part of the problem.
Today, nearly 35 per cent of Karachi’s estimated 12 million people live in shantytowns and slums where basic amenities like water and power are not legally available. Overcrowding in the existing housing units is another major problem; the national average stands at over five persons per room, as opposed to a more acceptable average of three per room.
But the question is of money. Who will provide the much-needed source? For experts, the answer lies in micro-credit financing. But micro-credit schemes do not yield huge commercial profits. Private sector may not like the idea, though there is a feeling that now is the right time for financing housing schemes.
In 1990, applications were invited from the private sector for setting up house finance companies. Out of the 24 applicants, seven were granted licence to start a housing finance company. Citibank Housing Finance Company Limited, International House Finance Limited and the LTV Housing Finance Limited started house financing. Two have been closed down and the IHFC is expected to be merged with a commercial bank.
Other four companies that got the licence did not start operations because of credit risk, non-availability of funds, ineffective repossession law/foreclosure law, high cost of funds and mortgage rate and lack of expertise, according the WB consultants.
Bankers see macro-economic stability and low interest rate environment, increased flow of remittances and investment in the housing sector, rupee stability and appreciation and anti-money laundering efforts assisting in the documentation of the economy as reasons for investment in house financing.
Housing finance is estimated at Rs2 billion a year. It accounts for around one per cent of the total volume of bank lending, which is very low and speaks about the banks’ cautious approach to lending for building a house.
“The ads are attractive and give you dream opportunity,” says Mubasher Mughal, who works in a public bank. “But when you go into details, it’s labyrinth. You need a constant source of income to have such loans.” According to Mughal, sometimes loans become a lifetime liability.
Mohammad Khan, who took loan from the state-owned House Finance Building Finance Corporation in early eighties, says when his private job was lost, loan became the biggest worry. “Had I not gone abroad and earn some good money, I fear to think of what would have happen.”
But that does not mean that people in Pakistan are not taking loans for building or buying houses.
“You must plan before hand,” says Ahsan Hashmi. He has taken a loan to buy a house in Islamabad. With a lucrative job in the private sector, Hashmi plans to give one portion of the house on rent. That is how he plans to return the loan of a private bank. But not everyone has this kind of resources.
Housing is the largest single asset class in Pakistan with an estimated Rs1700 billion. Yet housing finance is estimated to be less than one per cent of the GDP because there is no vibrant system of housing finance.
Experts say a vibrant housing scheme would see less unplanned growth in major cities, adding slums are becoming a challenge in Pakistan.
The Musharraf government decided to regularize kachi abadies (slums) set up after 1985. Late Umer Asghar Khan, then minister for labour and local bodies, took initiative to regularize slums in Pakistan’s major cities. But the initiative was lost after initial hullabaloo.
The last Pakistan Muslim League government under Nawaz Sharif started a huge housing project in its last days in 1999. The housing project, started under then powerful accountability bureau chief Saifur Rehman, was scrapped after the Sharif government was removed in October 1999 in a military coup.
Kashif Malik, who works in an advertising agency, says he owns land in Rawalpindi, but did not have money to build a house. “Whenever I discuss a scheme, it tells me a long, expensive way to building a house. And if I falter, that house would be snatched. It puts me off.” Malik says his expenditures leave little to plan for something long-term. “I know when you take money, you have to return, but the question is what cost.” The question of cost is worrying for everyone and there seems to be no way out.