Rapid urbanization in Pakistan has resulted in increasing the deficit of housing units. At this very moment, Pakistan is facing a shortage of over 9 million housing units. Government of Pakistan has started to give series attention to this issue and recently it has announced the Prime Minister Housing Scheme (PMHS).
Under this scheme the government wants to create more than 500,000 houses; however, the success of PMHS largely depends on the government successfully review the tenancy laws and bring these laws up-to-date. There are multiple reasons why Pakistan has the housing shortage, and one of the most important elements is weak tenancy laws in Pakistan.
In the law courts of the country, more than one-third of the total pending cases are related to disputes between the tenant and landlords of urban areas. These cases are not only creating huge backlogs in the courts, but they are also creating backlogs in the available housing units in the country.
Pakistani tenancy laws go back to pre-partition period. Under that law, the landlord or lessor had the right to seek the eviction of the tenant, through the court without giving any grounds. After the partition in 1947 the Punjab Urban Rent Restriction Act, 1947 came in place that put restrictions on the rights of the landlord to evict the tenant at will and raise the rent unilaterally.
Presently, all four provinces and cantonment boards have their own Rent Restriction Laws, and they are as follows: The Punjab Rented Premises Act 2009, Sind Rented Premises Ordinance, 1979, Urban Rent Restriction Ordinance 1959(KPK), Baluchistan Urban Rent Restriction Ordinance, 1959, amended 1980, and Cantonment Rent Restriction Act 1963.
The intentions of these laws are good, and they are considered beneficial to the parties. However, they also have become obsolete and need updating according to the current time. There are multiple issues with tenant laws in the country, however; they are restrictive especially concerning mortgages. These laws do not provide any solution to the cases that are related to owners of rented properties getting the default on their mortgages.
Since the Rent Restriction Laws are silent with this regard, the banking or housing finance institutions find it very difficult to enforce the security through foreclosure laws since the actual owner does not live in the house. This inability for them to collect back on their old debt make them reluctant to extend the mortgage facility to the people who needs them and hence it added further backlog in the housing sector.
Pakistan needs uniformity in its tenancy laws especially when it comes to mortgage-related issues. Every province should have same provisions and the transcribe laws otherwise the financial institutions would be reluctant to mortgage in those provinces with outdated mortgage laws. These actions by the financial institution would create problems for the government’s efforts to spread housing units in the nation.
The Law Ministry along with housing ministry needs to reform the tenancy laws because the government wants financial institutions to extend the housing finance credit to the people who are eligible of PMHS.
The lenders will only change their policies with regards to mortgages when they able to trust the legal system of Pakistan. The government has to perform serious reforms in current tenancy laws to gain the trust that it desperately needs to make the new housing scheme a success.
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