Filling in the housing gap has been in the agenda of past two governments; and is also part of things to do list of PTI, if the party comes in power. PM Gilani in PPP term (2008-13) promised to built one million houses per year; but nobody from media or even political party talked about ‘makaan' which was part of Bhutto's one-liner.
Later, PM Nawaz team (2013-18) had plans to build 0.5 million houses per year under Apna Ghar scheme. There was some hustle bustle in the planning rooms; but the project died down within first six months of tenure as Dar had other priorities.
Now PTI has housing on its agenda; and all of sudden, stakeholders are taking it seriously with some talking for it while others are criticizing it. Healthy debate is required to continue to fine tune the best available models to fill in 10-12 million units shortage.
No matter who comes in power, the issues relating to housing supply and demand need to be sort out. Lessons could be learnt The need is to take a leaf out of India’s book where providing enabling environment for both affordable and low cost housing has yielded significant results.
It would be foolish for any government to use fiscal resources to build housing as such steps may result in ghettos and ghost houses. There is anyways no fiscal space available for government to do that on a large scale.
It is the job of private sector and the government should work in smoothing out both demand and supply side constraints. The employment generation and boosting economy is a positive spillover of enhancing housing stock while the prime role of government is to pave way for building housing market.
The core of the issue is that demand does not exist at prevailing market practices where the transactions are cash based with no or little financing options. World over, households do not have enough cash to buy upfront and the sector thrives on housing finance.
The affordability is derived from a certain portion of household income (approximately 30%) going into servicing mortgage payment. It's all about cash-flows management as a very few can buy on upfront cash. In Pakistan, people usually save for housing in their prime time and finally build house either after or close to retirement. This is far from ideal.
The specialized institution (HBFC) was built in 1952 and the institution today exists just on paper. In 2005-08, HBFC used to give, on average, 25-30 loans a day (6,000-7,000 loans per year) while in 2017 the number is reduced to mere 2.5 loans per day.
The housing demand is growing, unfortunately despite commitments from successive government, the housing finance is down to its knees.
The fate of commercial banks is no different where the additional financing has slowed down too in the last decade or so. It has started picking up in the last year but that is primarily catering to high end market with financing options are available for properties in DHAs, Askrais etc. The middle and low class housing finance is virtually nonexistent.
In India, Housing Development Finance Corporation (HDFC) was formed in private sector in 1977 and today it is giving over 1.000 loans a day. How ironic is that in India, private sector institution of lower age is thriving, but in Pakistan a public institution miserably failed. HDFC in India alone has an outstanding portfolio of around $44 billion while it is less than a billion dollar in Pakistan, combined.
HDFC is one institution; today, in India there are around 80 specialized housing finance companies (mostly private) that work on providing housing finance; and commercial banks are apart from that. The Modi government has aimed at providing housing for all by 2022 which implies building around 15-20 million houses by 2022. And to do so, the country is adding another 30 specialized housing finance institutions.
The spur in housing finance has created market for housing supply finance to builders in India -private sector SME and big builders see commercial viability in low cost housing schemes as well. The commercial banks and specialized institutions are providing finance to supply side as there is rationale for supplying large number of houses as it is affordable for consumers to buy.
Thus, the core to enhance housing units in the country is to offer housing finance solutions to consumers. Once, that is taken care of, the scale can be build by government to provide land bank for housing with stipulated time to construct to arrest speculation and with cross subsidy models to have low cost housing (20-30%) in every dwelling.