CREATIVE COMMONS
The proposal was tabled in a meeting of the cabinet on April 12, chaired by Prime Minister Nawaz Sharif. Minister of Planning, Development and Reform Ahsan Iqbal made a presentation on the home ownership programme.
The cabinet was informed that Pakistan was recording the fastest pace of urbanisation in South Asia as its annual demand for housing units stood at 700,000, but only 250,000 units were being constructed.
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Owing to the deficit, the accumulated shortage had increased to around 10 million units.
A senior government official told The Express Tribune that the cabinet was informed that one-window facility should be launched for home developers.
It was proposed that 50,000 units should be constructed under the public-private partnership (PPP) mode with special allocation of Rs8.58 billion while Rs8 billion should be earmarked as a contingent liability after two years under the credit guarantee scheme for the risk coverage of banks.
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It was suggested that the initiative should target the salaried public and private sector employees in the beginning as down-payment was not required because people had the capital for schemes sponsored by the trusted developers.
Mortgages, like western countries, would not work in Pakistan due to the absence of foreclosure laws without which housing units of loan defaulters could not be seized.
Meeting participants insisted that the existing land should be optimally utilised and State Bank of Pakistan’s refinance schemes could be customised to reduce the government cost for the initiative.
It was observed that sovereign guarantees of the government were not required as insurance was normally included in the loan repayment plan of commercial banks.
Under a strategy, 100,000 houses would be planned in the first phase for which a special purpose entity would be required to coordinate, supervise, facilitate and innovate under the realm of PPP.
Pre-qualified reputable private-sector firms would be co-opted as partners through a co-branding mechanism.
A minimum of 20% units would be reserved for affordable housing in each housing project.
The minister of planning, development and reform proposed three financing options for the initiative.
These included mark-up subsidy on 20,000 housing units for the middle-income group, down-payment subsidy on 20,000 units for the lower middle-income group and underwriting of the risk by the federal government for bank financing for 10,000 units for the low-income group.
Other financing options included real estate investment trusts, launching HOPE savings bond/rupee-denominated investment bonds for Pakistani diaspora, balloting system or subsidies on construction input or tax breaks for the developers and contractors.
The need to identify the potential land available with the federal and provincial governments as well as their departments and agencies and to develop a land bank was also emphasised.
After comprehensive discussions, the cabinet constituted a committee under the chairmanship of minister of housing and works to present the final proposal before the cabinet for approval.
Published in The Express Tribune, May 2nd, 2017.
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