Playing for houses

Following up on one of his promises to construct five million houses during his tenure, PM Imran has now constituted a committee under Secretary Housing & Works to devise a comprehensive plan of action. The committee is studying international low cost housing models and ways that the housing gap can be plugged in Pakistan addressing the critical issue from a legal, financial and regulatory perspective. This plan along with SBP’s recently published low-cost housing finance policy (read “Rousing low-cost housing finance”, July 27, 2018) would certainly be a good jumping off point for the housing sector that boasts a shortage of 10-12 million houses.

Construction of houses is not like planting trees, it is a mammoth challenge that requires an overhaul of regulatory and legal frameworks that have prevailed in the country for decades. In fact, the new government must have set its eyes set on building cities, rather than building houses. Ambitious it may be, but that is the vision this country needs.

There is no contention that the government will have to introduce comprehensive land and city planning reforms that would counteract land tilting and registration issues, reduce the high incidence of land disputes and introduce better density laws and building codes that would ensure high land utilization(read: “Going high”, Aug 17, 2018). Further from a legal perspective, contract enforcement via strong foreclosure and property valuation laws are needed which would boost bank expediency to give out more home loans.

Measures will have to be taken to curb speculative hikes in land prices which are a driving factor why real estate in Pakistan is simply not affordable for the middle to low income group. Land authorities need better coordination and planning between them in auctioning land and provide speedy land acquisition. In fact, land allocation should be done in consultation with the city master plan. Authorities should regulate the system so that builders are bound to start construction within a stipulated time, while land for delayed projects can be re-auctioned. The land should be sold to only registered builders and developers, and so on.

In making this plan, the committee must remember that though the private sector has failed to introduce low-cost housing solutions thus far, the sector must be mobilized now, as the government cannot be in the business of constructing houses. Its role should be to provide regulatory structure and incentives for the private sector to introduce market solutions, while strong participation of the financial sector in filling the financing gap should be there in congruence.

One of the more popular models under public-private partnerships have been revenue-sharing or mixed income models where subsidized land is sold to builders to provide low-cost housing options together with middle to high income units. SBP has proposed a product where land is given free of cost to developers where at least half the units are low-income. Such projects however need to come with strict regulations to ensure they are not misused.

Developing underdeveloped and outskirt lands could also come with government incentives but it is necessary to ensure that the physical infrastructure (roads, transport etc.) are built together with connections to basic public amenities and access to schools, hospitals, playgrounds etc.

There are schemes such as Bahria Town which are stretching the city confines and have garnered attention, but even these units are not affordable, let alone favoured toward the low-income segment that is settled in slums and informal settlements. Such traditional models and big builder projects however, can be tailored toward being more inclusive through a balance of regulation and incentive. The larger picture must not be missed in meeting the 5 million houses target—which is that as population, rural to urban migration, and overcrowding grow, we have to think of the housing sector from a city planning lens, not only to refurbish existing cities but to create more cities.