{"id":82481,"date":"2020-02-21T11:24:34","date_gmt":"2020-02-21T11:24:34","guid":{"rendered":"https:\/\/www.zameen.com\/blog\/?p=82481"},"modified":"2020-02-24T05:40:37","modified_gmt":"2020-02-24T05:40:37","slug":"naya-pakistan-housing-projects-affordability","status":"publish","type":"post","link":"https:\/\/www.zameen.com\/blog\/naya-pakistan-housing-projects-affordability.html","title":{"rendered":"Affordability of Naya Pakistan Housing\u2019s Pilot Project"},"content":{"rendered":"\n

In the first two parts of this series (read part I<\/a> and part II<\/a>), we established that price movements\u2014particularly of land and construction materials\u2014against overall inflationary pressures in the economy have demonstrated a greater momentum. And this has serious implications on housing prices, as well as the government\u2019s on-going policy to fix them under the Naya Pakistan Housing Program (NPHP). <\/p>\n\n\n\n

It is clear that the\ngovernment will have to introduce fiscal or non-fiscal measures to keep a\ncontrol on the housing prices in this project. Evidently, if the program is to\nincrease the supply of housing\u2014particularly in the middle to low-middle income\ncategories where housing shortage is concentrated\u2014affordability will have to be\nfront and center. <\/p>\n\n\n\n

The information\navailable on the Punjab government\u2019s website for Punjab Housing and Town\nPlanning Agency (PHATA) is scanty, but it does provide fixed housing prices for\nthree key locations where the pilot project will run: Bhakkar, Layyah and\nQaidabad. The prices are for 3 and 5 Marla houses on single and double storeys\nand up to 4 rooms, and it has been assumed that the approved applicants will\npay an up-front 10 percent of the cost. <\/p>\n\n\n\n

The housing prices\nrange from Rs1.8 million to Rs2.95 million for up to two bedrooms and 3-marla\nhouses across these three locations while they vary from Rs 2.5 million to\nRs4.11 million for up to four bedrooms and 5-marla houses.<\/p>\n\n\n\n

\"Details
Details for monthly installments in Naya Pakistan Housing Scheme<\/figcaption><\/figure>\n\n\n\n
\"installment
Details of installment Plan for Quaidabad<\/figcaption><\/figure>\n\n\n\n

According to the\nNPHP registration forms, there are three different installment plans that each\napplicant can choose from. The lowest category includes installments of Rs5,000\nto Rs10,000, the middle category from Rs10,001 to Rs15,000 and the highest\ncategory from Rs15,001 to Rs20,000. The question is, if these installment plans\nare fixed and are aligned with the housing prices. <\/p>\n\n\n\n

Let\u2019s assume that these applicants apply for the most affordable mortgage financing product available in the market\u2014the House Building Finance Company (HBFC)\u2019s Ghar Pakistan Schemes<\/a>. This scheme is available for a house pricing up to Rs4.5 million, which falls within the price ranges under the pilot project mentioned above. The product is a fixed rate mortgage (FRM) of 12 percent with a tenor of 20 years. The tenor together with the FRM\u2014which is much lower than the current prevailing mortgage rates of Kibor+4%\u2014makes this an attractive product. Part of the reason is that currently, due to the asset-liability mismatch issue<\/a>, banks are unable to provide a mortgage of over 12 years. But more than that, the interest rates at the moment are simply too high. Ghar Pakistan, though it has limited funding available, is the safest bet. <\/p>\n\n\n\n

Considering this HBFC\nproduct, the estimated monthly installment for the above listed properties are\nmostly above Rs20,000\u2014with the exception for a few. Applicants who choose the\nfirst and second installment plan can certainly not avail the HBFC funding\nbecause even the upper limit of Rs20,000 seems not entirely enough to pay off\nthis loan. <\/p>\n\n\n\n

The second option is\nto go without this mortgage. Households can pay-off the housing cost without\ntaking on a loan between 6 and 15 years considering that they pay the upper\nlimit of the monthly installment i.e. Rs20,000. Of course, this seems entirely\nunreasonable because developers typically exit once the project is constructed\n(which is estimated to take 1-3 years depending on the size of the project) and\nneed to get their profit as well. That cannot be done if the property price is\nnot recovered for as long as 15 years. The government needs to come up with\nmechanisms for the developers to recover their cost and get their profit, and\nthe applicants to complete the pay-off in the required time.<\/p>\n\n\n\n

In the first option,\nthe difference of mortgage installment to be paid to HBFC and the monthly\ninstallment picked by the applicant will have to be met. Will it be a cash\nsubsidy, an interest rate subsidy or any other mechanism? How much fiscal\nobligation will that mean for the government? We will explore in the next part.\n<\/p>\n","protected":false},"excerpt":{"rendered":"

In the first two parts of this series (read part I and part II), we established that price movements\u2014particularly of land and construction materials\u2014against overall inflationary pressures in the economy have demonstrated a greater momentum. And this has serious implications on housing prices, as well as the government\u2019s on-going policy to fix them under the Naya Pakistan Housing Program (NPHP). It is clear that the government will have to introduce fiscal or non-fiscal measures to keep a control on the housing prices in this project. Evidently, if the program is to increase the supply of housing\u2014particularly in the middle to low-middle income categories where housing shortage is concentrated\u2014affordability will have to be front and center. The information available on the Punjab government\u2019s website for Punjab Housing and Town Planning Agency (PHATA) is scanty, but it does provide fixed housing prices for three key locations where the pilot project will run: Bhakkar, Layyah and Qaidabad. The prices are for 3 and 5 Marla houses on single and double storeys and up to 4 rooms, and it has been assumed that the approved applicants will pay an up-front 10 percent of the cost. The housing prices range from Rs1.8 million to Rs2.95…<\/p>\n","protected":false},"author":97,"featured_media":82484,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[29],"tags":[45413,43961,54733,42928],"persona":[32409,32411,35639],"class_list":{"0":"post-82481","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-construction","8":"tag-affordable-housing-in-pakistan","9":"tag-lob","10":"tag-naya-pakistan-housings-pilot-project","11":"tag-zameen-research","12":"persona-constructiondevelopments","13":"persona-property-investment","14":"persona-property-management","15":"cat-29-id"},"acf":[],"yoast_head":"\nAffordability of Naya Pakistan Housing\u2019s Pilot Project | Zameen Research<\/title>\n<meta name=\"description\" content=\"Analyzing Housing Affordability Given Available Financing Options and Plans\" \/>\n<meta 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