PM’s housing initiative – I


Vagaries of Consciousness

  • Possible hazards and ways of overcoming them

For every democratic government, a signature initiative with populist trappings is an irresistible desire. There is also a justification for such program as elections promises have to be delivered. However, it is frequently observed that while designing such a program the fundamental merit based on economic feasibility, regulatory imperatives and practical limitations are not fully taken into account. A scheme personally patronised by the chief executive is likely to discourage public servants and experts to speak their mind. Equally importantly, such patronage could also induce clever minds to take advantage of the situation. Only a very dispassionate and judicious stance at every step of the design and implementation of the scheme would be required to ensure a successful scheme. In this two-part article, we would make an assessment of the scheme and give some suggestions that would be helpful while designing and implementing the scheme.

We do note the noble intentions with which this much needed scheme of low-cost and affordable housing is announced by the prime minister. There are so far not many details available. However, what the PM said while unveiling the scheme suggests it will have the following features: (a) an authority called Naya Pakistan Housing Authority (NPHA) will be established to implement the scheme; (b) low-income people to be eligible; (c) land would be provided to developers through a land bank, for which the data of available lands from all over Pakistan is being collected; (d) there would be a one window operation through coordination with provincial and local governments for all matters; (e) in both urban and rural areas; (f) high rise buildings with all civic amenities would constructed; and, (g) local construction material, labour and technology transfer would be aimed at.

A Task Force has been formed comprising eight members from private sector (including builders) and five members each from federal and provincial governments has been established to oversee the scheme. The PM also remarked that the governor SBP has been asked to set up a National Financial Regulatory Body in 60 days. Based on subsequent statements of government officials, it is evident that the scheme would also involve housing and mortgage financing from the banking system.

These are rudimentary details, quite insufficient to form an opinion about the efficacy of the scheme. Our observations on the scheme, accordingly, would relate to alerting the policy makers on the hazards the scheme would likely face and wherever feasible indicating mitigating measures to overcome the obstacles.

Evidently, a very narrow scope building/housing is available in the context of lands that belong to the federal government. In the provinces, they have to be the engine to move the scheme

Many analysts have expressed doubts about economics of five million houses over the next five years. This assessment is not supported by estimates from the demographic profile of the country and prospects of urbanisation with a growing population. For the following reasons, we feel that the target is sensible:

At present, there is no reliable data on housing stocks in Pakistan, and flow of net new houses. The available Census data is for 1998 which indicated a total population of 20 million houses with an occupancy of 6.8 persons per house. The housing census conducted along the Population Census 2017 has yet to be released. Even if we assume that the housing stock was growing at the rate of population growth (though some may argue that with rising incomes, and emergence of a solid middle class, the growth may be higher) the total housing stock would be around 31 million. Adding one million houses under the new initiative would amount to a mere 3pc increase in the housing stock. A recent World Bank study has estimated housing 10 million and the deficit is growing. Thus the demand for housing is both strong and growing.

In our view, the challenge is not economics but regulations and their application on the ground. At the outset, the government should be well aware of its fundamental limitation of not having the parliamentary majority needed to confidently pass any legislation except the money bills. At present, PTI has only 12 senators and with MQM and some independents it may add few more votes, but the opposition is overwhelming if gets united in opposing a legislative proposal. The idea of NPHA would be hopeless unless it is established under a special law with requisite mandate and powers. This would be the first obstacle and for which the government has to elicit full cooperation of the opposition.

Another limitation to this initiative is furnished by the constitution which has not allocated the subject of housing to the federal government. Therefore, it is a provincial subject. The closest it comes to a notion of works for the federal government is provided in the entry 37 in the Part-1, Federal Legislative of the Fourth Schedule, which reads: Works, lands and buildings vested in, or in the possession of Government for the purposes of the Federation (not being military, naval or air force works), but, as regards property situate in a Province, subject always to Provincial legislation, save in so far as Federal law otherwise provides.

Evidently, a very narrow scope building/housing is available in the context of lands that belong to the federal government. In the provinces, they have to be the engine to move the scheme, and therefore, their ownership has to be central to the success of the scheme. With two explicit provincial governments and in Balochistan, it is a friendly environment provided they agree to work closely with the federal government. Even Sindh would come on board provided the model developed at the center is irresistible. It would not be an overstatement to say that housing is a subject whose efficiency in terms of lands, titles, records, transfers, foreclosure, disputes resolution and sale and purchase of immovable properties and taxation depends entirely on willingness and seriousness of the provincial governments. If they are on board with total buy-in, the scheme stands a very chance of success.

An area that can help federal government to play a pivotal role in the success of the scheme is through its exclusive jurisdiction on banking, finance and insurance. At present the availability of housing finance is miniscule, lowest in South Asia. The factors that impede people’s access to formal financial sector would have to be removed to spur investments in the housing sector. [To be continue]