The potential of katchi abadis

A recent study called for Karachi’s katchi abadis, or squatter settlements, to be formally recognised

A recent study by the US Institute of Peace called for Karachi’s katchi abadis, or squatter settlements, to be formally recognised, stating that this will release “locked” equity value for house owners by allowing them to borrow against proper title deeds. As a result, they will be able to build additional floors and further expand their businesses, potentially leading to increased income and employment at the grassroots level. It was estimated in 2012 that around 55 per cent of Karachi’s population lives in unplanned or partially planned areas. One would imagine that the percentage has only gone up since then.

While there is an undoubted need to formalise Karachi’s low-income squatter settlements and the study makes some valid points, any effort to make this happen will face practical difficulties. Banks will shy away from lending to these house owners because the risk of default in such cases will be high. Regularising slums in this manner means that you are, in effect, creating demand for equity when the power to buy is low and subsequently, asking banks to hold onto properties in slums in case of default. The focus instead needs to be first on developing these low-income neighbourhoods through formal recognition of their property and providing them with basic facilities — access to healthcare, education, utilities — before they are asked to contribute to society. Rarely has an attempt been made to regularise the informal sector so that it can contribute to the national exchequer and the government needs to take the first step in easing the process of regularisation. The study states that Karachi needs to have an empowered local government system and accountability, and we agree. Provision of basic needs to katchi abadis is the first step towards long-term development and there is a lot of untapped potential here. Maybe banks can then finance small businesses against property deeds, but not before the government starts catering to the basic needs of low-income neighbourhoods. However, the hope for this happening any time soon remains low.

Published in The Express Tribune, May 10^th, 2016.

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