October 02, 2006	Monday	Ramazan 8, 1427

A NEW policy on the “housing and real estate development” for channelling sizeable resources to the investors and amending land acquisition laws has been jointly drafted by the Ministry of Housing and Board of Investment.

The draft envisages an attractive package to lure foreign and local investors in rural housing schemes. There are many private and cooperative housing societies operating or being established in the urban areas. None a single one is being set up in the rural areas.

People suffer from critical shortage in housing both in urban and rural areas especially the poor. And the rising land prices have been identified as one of the major impediments in the way of investment in the housing sector, which both the ministry and BoI believe, needs to be rationalised by a comprehensive long-term workable policy.

It would be the second effort to lure some meaningful local and foreign investment in the housing and real estate sector. A number of incentives were given to the investors in the National Housing Policy to make housing affordable for the poor. Now, there is a growing realisation that a rapid growth in housing finance can significantly develop housing and real estate.

The copies of the draft have been sent to the economic ministries, State Bank of Pakistan (SBP), banking institutions and other concerned agencies in order to come up with a final report to be approved by the cabinet for effective implementation.

The BoI and the ministry of housing and works are of the view that the financial institutions should give mortgage loans for housing purposes at market rates.

All commercial banks should be encouraged to advance loans for housing and housing projects by earmarking a “substantial percentage” of their loan portfolio like they do for other industries and commercial projects. The central bank is being requested to set up a “housing refinance window” for long-term funds from multilateral agencies.

Institutions maintaining insurance, provident and EOBI funds etc can be encouraged to invest a part of their portfolio in the housing and construction sector including long-term housing bonds. A part of the sale proceeds of valuable public land will be set aside to provide plots for low-income people, for the poor and needy at “concessionary rates”.

Similarly, the draft urges financial institutions and housing institutions to float long-term bonds at market rates to raise housing finance. Also, housing finance institutions shall be promoted to encourage savings and provide credit from community-based finance and other sources.

Under the proposed policy, the provincial governments would be required to urgently identify state and other lands in and around urban and local settlements for housing development. It provides for amending land acquisition laws to make provision for unified, transparent and market oriented system and minimisation of litigation.

The provision of trunk infrastructure shall be the responsibility of Wapda, PTCL, SNGPL,SSGCL, KESC etc. The cost of trunk infrastructure will be an additional charge on the public and private housing development schemes with the planned areas.

The construction sector is currently growing at by 7.9 per cent. and has attracted an investment of $89.3 million since July 2004. The draft anticipates that the growth in the sector will be multiplied manifold in the future. Building and construction sector is identified as the driver of economic growth.

According to the official estimates, Pakistan has over 19.3 million housing units. For a population of 148.7 million people, about 24.8 million units are required. Hence a shortfall of 5.5 million homes is estimated at end June 2004. On an annual basis, the country needs 570,000 units against the actual supply of 300,000, showing a shortfall of 270,000 units and the backlog is rising.

The overall housing stock comprised 39 per cent kuchcha houses, 40 per cent semi-pukka and 21 per cent pukka houses. The household size is 6.6 persons and the occupancy per room is 3.3 persons. It is estimated that to make up the backlog and to meet the shortfall in the next 20 years, the overall housing production has to be raised to 500,000 housing units annually.

The housing ministry and the BoI both believe that without extending adequate fiscal and non-fiscal incentives to the local and foreign investors, it would be difficult to ensure required pace of investment in housing projects.

However, it is agreed that the existing National Housing Policy has not been able to cope with the problems effectively..

Once the final report of the housing ministry and the BoI was prepared and submitted to the prime minister for approval and it is enforced effectively, one could talk about the new investment opportunities in the housing sector.