{"id":73211,"date":"2019-11-12T06:37:26","date_gmt":"2019-11-12T06:37:26","guid":{"rendered":"https:\/\/www.zameen.com\/blog\/?p=73211"},"modified":"2019-12-05T05:25:10","modified_gmt":"2019-12-05T05:25:10","slug":"statistical-overview-naya-pakistan-housing-plan","status":"publish","type":"post","link":"https:\/\/www.zameen.com\/blog\/statistical-overview-naya-pakistan-housing-plan.html","title":{"rendered":"Naya Pakistan Housing Plan: A Brief Economic Analysis"},"content":{"rendered":"\n

Five\nmillion houses in five years\u2014that is the dream plan painted by Prime Minister\nImran Khan soon after he entered office. The plan is targeted at the lower\nincome groups of the population, earning between Rs10,000 and 25,000 a month, and\nis direly needed given the startling housing statistics. The existing housing\nshortage is around 10-12 million houses, of which nearly half is urban, while\nmore than 60 percent demand comes from the low-income segment. However, the\ncurrent housing stock is merely 4.9 million houses, due to which critics cast\ndoubt on the incumbent government\u2019s ability to double the stock in just five\nyears. <\/p>\n\n\n\n

Let\u2019s\nhave a quick overview of the plan. The government will be the facilitator, and the\nregulator, and the plan will be executed with the heavy involvement of the\nprivate sector to drive and mobilize the program. As expected, the private\nsector has shown great interest in the project. As many as 41 private sector\ndevelopers and builders with existing land banks to their name have already\ndropped their hats in the ring, while many others are standing in the queue.\nSeveral foreign investors, including Middle Eastern and Chinese, have expressed\ntheir interest in the project. <\/p>\n\n\n\n

There\nis some contention on the total investment required. Some media estimates\nsuggest that the five-year project needs an investment of around $180 billion. According\nto some critics however, generation of such a huge investment is impossible given\nthat the amount is around 60 percent of the country\u2019s current GDP. But the\ngovernment is not as worried since the project is meant to be market driven. <\/p>\n\n\n\n

However,\nthis estimate itself seems exaggerated in the first place. If the average cost\nof a low-income house is less than Rs2.5 million, (which according to the SBP\nshould be the maximum price of a low-cost home), that alone should translate into\na total cost of $80 billion. Representatives of Association of Builders and\nDevelopers (ABAD) believe the correct figure is between $40-$50 billion for the\nentirety of the project since the cost per unit will be lower than Rs2.5\nmillion and significantly lower in the case of rural housing. <\/p>\n\n\n\n

\"Naya
Estimating average cost of the PM Housing Plan for 5 million units<\/figcaption><\/figure>\n\n\n\n

The\nbanking sector will be providing the mortgage for the financing, and commercial\nbanks can raise the money required by floating bonds from investors. However,\nthe interest rate of 13-14 percent is neither affordable for the low-income\nsegment, nor can the difference be footed by the government. <\/p>\n\n\n\n

The State Bank of Pakistan (SBP), in its low-income housing finance policy<\/a> published in Nov-18, proposed that the central bank will provide refinancing  facility of up to Rs1 million (or 50% of the total loan amount) to commercial banks, and at 5 percent to Development Finance Institutions (DFIs),  while the remainder of the loan can be either fixed at 12 percent, or at Karachi Inter Bank Offers Rate (KIBOR) + 4 percent by the banks and DFIs. This, according to the SBP, will be provided to both individual house borrowers and housing builders\/developers for low-cost housing. The average interest rate then becomes 7-8 percent. <\/p>\n\n\n\n

Surprisingly,\nthe policy was retracted in Mar-19, and replaced by a much-condensed version of\nits earlier edition, proposing a single financing facility for special segments\nincluding: widows, children of shaheed, transgenders, special persons, and people\nin areas severely affected by war against terrorism, setting the interest rate\nat 5 percent for them. According to the policy, SBP will finance up to 100,000\nborrowers under this financing facility for special segments.<\/p>\n\n\n\n

If\nthe designed model has even lower per unit cost, owing to innovative low-cost\nbuilding solutions and longer periods for mortgages, the affordability issue\ncan be addressed. Reports suggest that applicants will pay 20 percent in down\npayments, which would result in even lower monthly mortgage payments. <\/p>\n\n\n\n

The\nlegislative work required specially in the form of non-judicial foreclosure\nframework is underway, which would empower banks to exercise their right to\ncollateral in the case of defaults, which in turn will reduce banks\u2019 reluctance\nto dole out housing loans. The National Assembly very recently passed two\nordinances in this regard, the Naya Pakistan Housing Authority Ordinance 2019,\nand the Recovery of Mortgage Blocked Security Ordinance 2019. <\/p>\n\n\n\n

The government is taking the regulatory side of the equation\ninto account as well. A land bank registry will be created to determine the\nland available with federal and provincial governments, land owning agencies\nand the private sector. The Naya Pakistan Housing Authority on the other hand,\nwill introduce a one-window facility which will regulate and facilitate the\nproject. <\/p>\n\n\n\n

The success of this mammoth project will require well-crafted long-term\nplanning, and a solid financing model. Additionally, existing inefficiencies in\nthe property and housing market will need to be tackled. This will keep the affordable\nhousing stock growing even in the long run. Such improvements include, for\nexample, introducing land reforms, zoning and land use laws, curtailing speculative\ninterest in the market, documenting the real estate sector and finally establishing\na real estate regulatory authority that will oversee it all. Easy to say, a lot\nharder to implement. <\/p>\n\n\n\n

To read more on latest property related research, you can check out our piece on housing shortage in Pakistan<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Five million houses in five years\u2014that is the dream plan painted by Prime Minister Imran Khan soon after he entered office. The plan is targeted at the lower income groups of the population, earning between Rs10,000 and 25,000 a month, and is direly needed given the startling housing statistics. The existing housing shortage is around 10-12 million houses, of which nearly half is urban, while more than 60 percent demand comes from the low-income segment. However, the current housing stock is merely 4.9 million houses, due to which critics cast doubt on the incumbent government\u2019s ability to double the stock in just five years. Let\u2019s have a quick overview of the plan. The government will be the facilitator, and the regulator, and the plan will be executed with the heavy involvement of the private sector to drive and mobilize the program. As expected, the private sector has shown great interest in the project. As many as 41 private sector developers and builders with existing land banks to their name have already dropped their hats in the ring, while many others are standing in the queue. Several foreign investors, including Middle Eastern and Chinese, have expressed their interest in the project.…<\/p>\n","protected":false},"author":97,"featured_media":73214,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[11053],"tags":[42926,42927,43961,10649,26741,42928],"persona":[32409,32411,35639],"class_list":{"0":"post-73211","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-laws-taxes","8":"tag-analysis-of-naya-pakistan-housing","9":"tag-economic-analysis","10":"tag-lob","11":"tag-naya-pakistan-housing-program","12":"tag-naya-pakistan-housing-project","13":"tag-zameen-research","14":"persona-constructiondevelopments","15":"persona-property-investment","16":"persona-property-management","17":"cat-11053-id"},"acf":[],"yoast_head":"\nRevisiting Naya Pakistan Housing Plan | Zameen Research<\/title>\n<meta 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