Pakistan housing shortage to persist despite PM’s initiative

Pakistan's housing shortage is likely to go up from 11.4 million homes last year to 17.2 million by 2025 despite Prime Minister Imran Khan's landmark initiative to construct five million homes in the next three years, industry experts say.

Referring to latest data, developers and industry stakeholders said it is expected that housing demand will grow from 1.07 million housing units per year in 2020 to 1.24 million in 2025.

Industry experts and banking officials said the government of Pakistan is providing loans under its low-cost housing scheme to bridge the gap between demand and supply of housing units in the country.

Shazil Imtiaz Rafi, managing director of Rafi Group, said there is no second opinion that the housing package gave new life to the real estate market.

"Definitely. Besides the regulatory and financial benefits, there has been a colossal shift in the perception of real estate developers from being a shady mafia to critical contributors of economic well-being not just in view of the government machine but the people as well," he said.

The State Bank of Pakistan, the central bank, has relaxed rules for its low-cost housing scheme and advised banks to start issuing loans to the deserving segment of the society.

It is also working together with the Ministry of Finance for the affordable housing scheme. It has set targets for banks to provide loans for affordable housing and banks who fail to meet said targets will be fined.

"The application form is very simple. People will have to provide personal details like their names, CNIC numbers and addresses, along with information about their occupation," according to a banker.

He said these loans are being provided for three different categories of homes for up to 20 years.

"Under the low-cost housing scheme, applicants will have to provide 10 per cent of the loan amount as equity, while the remaining 90 per cent will be financed by banks. Usually the banks ask loan applicants to provide 30 per cent of the amount themselves and they finance only 60-70 per cent. And the interest rate is ranging from five per cent to a maximum nine per cent," he explained.

Another branch manager of a private sector bank said people can visit any a lender's branch across Pakistan to avail loans under the scheme.

"There are nearly 14,000 bank branches across Pakistan and most of them are designated to receive and process loan applications.

"Even the branches that are not designated to process applications have all the information to provide to applicants," he said.

Pakistan was facing an overall housing backlog of 10.3 million housing units in 2019. Of the total, urban housing shortage was estimated to be around 3.4 million, while rural housing was over seven million.

The housing shortage in Punjab is estimated to be around 5.5 million housing units, followed by Sindh (3.1 million units), Khyber Pakhtunkhwa (1.3 million units) and Balochistan (0.5 million units), according to latest available data.

Shehriar Imtiaz Rafi, chief executive of Rafi Group, said the housing package is an ongoing and evolving process that will ultimately benefit overseas Pakistanis. However, he said expats are not fully aware of the latest developments due to geographic limitations and they were handicapped when it came to critical information regarding projects.

"There was a complete lack of transparency with regards to legal status, exact locations, financial situations and credibility of projects. The housing package involves a new regulatory framework that will put much of this information up front and available to anyone who needs it. The new authorities will also be able to help overseas Pakistanis in any potential dispute resolution," he said.

To a question on whether Pakistan's real estate industry has the potential to attract UAE or Gulf investors in the wake of Khan's plan to build five million housing units by 2023, he said the housing package is just a part of a wider plan to invest in the country.

"I think it will be other factors such as the China Pakistan Economic Corridor in combination with Khan's policies that will offer Gulf investors something no other place can: 'Getting on the ground floor of China's mighty economic footprint' as it brings its focus to the Indian Ocean/Arabian Sea area," he said.

Moazzam Nawaz, chief executive of Lahore-based Moazzam Estate, echoed similar views and said Khan introduced an excellent initiative to empower the poor segment of the country to construct their dream home with the help of bank financing for a period of up to 20 years on as low as five per cent per annum.

"It is an excellent move that has revived the country's real estate industry. We have noticed brisk activity in the market and I am confident that the proposed package will not only revive construction, real estate and allied industries but also put the economy on the road to quick recovery," he said.

He said the housing package offers huge benefits to overseas Pakistanis as they can now generate funds through local banks not only to construct their own house but also extend help to their brothers, sisters and other relatives.

"The provision of loans to the poor people for the construction of their own houses by the commercial banks for the first time was a good omen," he said.

— muzaffarrizvi@khaleejtimes.com