If you live in a ‘slum’ and earn less than Rs20,000 a month, you are more likely to go to a loan shark than a bank if you want to buy land and build your own home.
This situation exists because the government seems to ignore the reality that even the poor need homes in Karachi. There is demand for 80,000 housing units a year but the formal sector can only provide 40%.
Urban experts, Arif Hasan, Noman Ahmed, Mansoor Raza, Asiya Sadiq, Saeed ud Din Ahmed and Moizza B. Sarwar, take a look at this phenomenon in a report called ‘Land ownership, control and contestation in Karachi and implications for low-income housing’. It was prepared for the IIED Human Settlements Programme and was launched at NED University on Friday with the screening of a documentary called ‘Karachi Rising: The Unplanned Densification of Low-Income Housing’. A word of warning came from Arif Hasan himself: it is dry reading. Its 104 pages are enlightening but extremely depressing.
The problem is that our finance system doesn’t match our economic conditions. So, for example, people generally live off their salary and have few savings. But if you want to own a house you have to buy it outright - there are no staggered financing or mortgage options. The nine formal housing finance institutions won’t lend you money if you say you want to buy land. They won’t do this because it is too risky for them given the unstable land registration system and because the State Bank has set a high interest rate of 12%.
This is why the experts argue that the government needs to seriously think about how to provide the poor housing where they want it. The cost of land has risen from Rs176 per sq meter in 1991 (double the daily wage) to Rs10,000 (40 times the daily wage).
Profile of financial institutions that fund housing
SOURCE: LAND OWNERSHIP, CONTROL AND CONTESTATION IN KARACHI AND IMPLICATIONS FOR LOW-INCOME HOUSING
And so you do what Kulsoom did. She said that when she got fed up of paying rent she moved to Surjani Town after hearing that she could pay Rs300 a month instalments for the Rs8,000 plot. “I thought buying land would be good for my children,” she said in the Rising Karachi documentary. “But it has been misery and suffering ever since.” She has to wait 2 hours to get a bus into town.
Kulsoom could have gone to the House Building Finance Company (HBFC), one institution that is supposed to help poor people with housing. But while the HBFC has so far financed 450,000 houses with Rs47 billion, a representative agreed that strict procedures to assess credit worthiness means they are only lending to middle-income folks.
It doesn’t help that the poor prefer informal deals (read loan shark) even when formal ones (banks) are available. They don’t trust market operators or government officials. It is hard for them to get the information they need to make these decisions and the paperwork is often beyond their comprehension or in a language they are familiar with.
Take for example HBFC’s Ghar Asan Flexi scheme: 23 documents need to be submitted before you can even apply. That means you have to run around to nine agencies to get them attested. And while the HBFC has a good website, few people know about it.
The poor who have taken up in katchi abadies find it hard to access credit for one other major reason: a lack of documentary evidence of land ownership and informal employment (which means they don’t have salary slips or tax certificates to show).
The solution, argue the experts, is for the government to focus on pro-poor housing. It’s not as if it doesn’t have the land. Community credit helps as does subsidising the interest rates for low-income groups. It is because the formal sector hasn’t bothered to focus on the poor that the ‘informal’ systems have spread. As Hasan put it: if it weren’t for the land ‘mafia’, the poor would have no homes.
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Published in The Express Tribune, September 15th, 2013.
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