• An attempt to reduce distributional equity through consumer financing

Affordable housing is a common concern of developing nations like Pakistan. Developing countries are the victims of housing shortage, which is in critical condition over the past decade. Every political party is come up with the slogan of ‘Food, Clothes, and Housing’ in their election manifesto, but this issue gains priority in present government as Prime Minister, made a campaign promise during the elections 2018 to build five million homes so, after winning the elections government announce Naya Pakistan Housing Project to address the affordable housing situation. As of 2021, this ambitious policy has made some progress to increase the supply and availability of affordable housing.

Naya Pakistan housing project based on a public-private partnership structure to target the demand side of the housing crisis, where government intends to increase consumer borrowing capacity by improving access to financing options in the form of long-term loans to ensure affordability of housing units while efforts are taken to boost housing supply through provision of parcels of federal and provincial governments land to developers, which reduce the cost of production for housing developers by diminishing land acquisition costs, government land provision is meant to incentivize more developers and contractors to build low-income housing infrastructure. Under this agreement, the price of land is ultimately recovered from the end consumer, as opposed to the developers who utilize their own funds for construction but benefit from the economies of scale that result from the utilization of standardized design. The government also promised to facilitate the provision of utilities such as gas, water, and electricity for developers and future homeowners alike. Additionally, the government aims to streamline processes by cutting down approval times on zoning and permitting requests. Collectively, the housing policy stands on three pillars:

  1. Creation of demand for housing by improving access to loans for housing finance by increasing long-term loans.
  2. Providing public land to builders for immediate construction to improve supply of houses.
  3. Facilitating the housing schemes through timely approvals and provision of utilities.
Loan Amount Afforded By Each Income Quintile
Quintile Monthly Income (PKR)1 Monthly Expenditure on Housing (PKR)2 Maximum Affordable Total Loan Amount (PKR)3
1 (lowest) 23,192 5,566.08 619,900
2 29,049 6,971.76 776,500
3 31,373 7,529.52 838,600
4 37,643 9,034.32 1,006,100
5 (highest) 63,544 15,250.56 1,698,400
Source: PSLM 2017 (PBS 2018-19, 35).

The loan policy announced by Government of Pakistan coupled with the provision of land, is set to ensure that both demand and supply forces work together to ensure greater availability of housing at the lowest income strata. However, there is nothing in the land or loan policies to ensure that the poorest income groups will benefit from it as the ceiling price point of PKR 2.7 million as the loan amount is set to benefit only the average or highest income groups. Apart from capping the value of the final property being sold at no more than PKR 3 million, the government has not included or implemented any provisions to ensure that speculative buyers will not enter the market. Even more concerning is that the real estate market in Pakistan is already rife with speculative buying. Returns in the real estate market have been high historically. Residential property, plots of land, and houses have all seen a consistent upward trend while the low risk of investment due in part to low volatility of prices has ensured that investors, both small and large scale to continue to invest in the real estate market.

Economic factors and urban trends provide justification for the Pakistani government to intervene in the housing market to protect almost 78 per cent of the Pakistani population so, there is a dire need to revitalize the housing industry with a special focus on the lowest-income strata which is definitely transformational for the Pakistan economy. Targeted policy is required to ensure that the right segments of society benefit from the government’s intervention, which is only possible if we provide benefit to the lowest income stratum from the loan structure. There is no doubt in the fact that, serious lack of distributional equity exist in Pakistan’s housing market as too much is available for the rich while too short for the vulnerable poor class. Naya Pakistan Housing scheme is a remarkable effort which sheds the light on a greatly neglected and festering issue but it is mandatory for the government to do more to ensure that government land and revenue are utilized for the benefit of those who need it the most because, “A nation will not survive morally or economically when so few have so much and so many have so little”.

The author is MD IRP/National Coordinator of Blue economy/Faculty Department of H&SS, Bahria University Karachi

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