August 10, 2003

The sad story of a low-cost housing scheme that was supposed to revive the economy and bolster the sagging image of a former premier

NAWAZ Sharif found himself under tremendous threat during his second tenure as prime minister for sporting his own style of politics. The country’s powerful establishment was unhappy because it thought the prime minister wanted absolute power. The situation called for some measures for Nawaz Sharif’s image-building.

NESPAK had worked out a master plan to overcome the housing shortage in the country. The master plan (1999) projected that the country’s current overall demand was around 6.25 million houses. The master plan also pointed out only 25 per cent of the population could afford buying a house and the formal sector was meeting only 27 per cent of the housing need.

The prime minister became excited with the master plan, convinced that the housing scheme would result in the revival of the national economy as at least 40 industries ancilliary to construction would get a tremendous boost. The announcement of the plan promised to kick-start the economy He was banking upon Senator Saifur Rehman who took it upon himself to execute the project.

The ‘Prime Minister’s Low Cost Housing Scheme’ was announced in late 1998. The original plan envisaged the construction of 500,000 flats and row-houses in all major urban centers of the country in a period of three years. The price of these houses was to be realized in easy installments spanning over 20 years. Banks were supposed to advance soft loans to allottees. But when the crunch came, the government started feeling the difficulties. The first of the problems was the refusal of banks to finance the ambitious project of about Rs400 billion.

The first Nawaz Sharif government had left a bad precedence of the “yellow cab” scheme which had eaten up about Rs17 billion of different commercial banks. When the banks refused, the State Bank of Pakistan was involved but the result was the same as the SBP also expressed its inability to force the banking sector to provide such a huge loan.

The government, on the other hand wanted the entire project to be completed within a period of six months. However, the execution period was extended to 12 to 18 months.

As the banking sector had refused financing the scheme, the housing plan, extending over 45 major urban centers of the country, was also revised. The Nawaz Sharif government now decided that it would itself finance 18 schemes in 12 major cities. The remaining schemes were to be executed with the help of the private sector. The PMHA then prepared a pilot project of these 18 schemes and work on them started immediately. The sites selected, all on state land, were seven in Lahore, six in Islamabad, four in Karachi and one in Peshawar. A total of 4,364 flats were to be built in three different categories.

But the pilot project started with a big anomaly. Raising of infrastructure is the normal way of beginning a housing scheme. But the pilot project started with first raising building structures. None of the 18 pilot project sites had roads, streets, street light, power and water supply, sewerage and telephone lines and boundary walls when the construction work began in early 1999.

Shahbaz Sharif was not in favour of the project because he thought that the programme was too ambitious to be completed and the Sharifs political career would be further eroded if the housing scheme fell short of the expectations of the people. It was his opposition to the project that led the elder brother to think that the younger brother was in political competition with him at the behest of the powers that be.

Ironically, Shahbaz was not associated with the project in the beginning although some Punjab government lands were also in the scheme. But when the construction cost came close to Rs650 per square foot and exceeded the estimates, the Punjab chief minister’s opposition grew. It was at this stage that Shahbaz Sharif was involved and the federal government issued a directive that the opinion of the provincial chief minister (only the Punjab because no provincial land was involved in other provinces) should be solicited in the “next” meeting. The next meeting witnessed a concern being expressed at the high cost of construction .

The construction work was in progress when the Sharif government was sent packing and Gen Pervez Musharraf took over. By then the project had incurred an expenditure of about Rs one billion and the construction of flats was in different stages. The military government suspended the scheme and held an inquiry into its affairs. After about a year, the military government decided to resume the project when it saw that the state was under an obligation to pay the builders what they had spent on the scheme. It decided that only the ongoing 18 schemes would be completed. The price of land was included in the price of flat and the House Building Finance Corporation (HBFC) was put under obligation to provide an amount of Rs one billion to clear outstanding bills. It was also decided that the project should be streamlined on the lines of private developers and builders executing housing schemes.

But the military government also did not start with a clean slate. It hired the services of VIP Marketing for the sale of flats. This agency sublet its contract to the private sector at 15 per cent commission that was to be added to the contractors bill and then sat idle with only occasional arm-twisting of sub-contractors.

Two schemes at Gulistan-i-Jauhar in Karachi, with 544 B type flats were offered to the Sindh government. The scheme at Misri Shah in Lahore, completed, has been offered to the Punjab police and is said to have been accepted by the department on a payment of Rs150 million.

Five Pakistan Railways sites across the country are involved in the scheme. All are being offered to this department. But PR seems interested only in Walton Road, Lahore. The Pakistan Railways accepted the scheme at Walton as it is within the four walls of its training academy. The government had worked out a price of Rs201 million for five railway sites and the price of the scheme in Walton was fixed at Rs172 million. The PR, as such, is accepting the scheme in Walton in lieu of the price of its five sites. The scheme at Wheatman Road is not acceptable because the land is said to be unsafe for a housing colony. But the PR is not ruling out the purchase of some other schemes for it can sell flats to its employees on easy installments.

The new marketing plan has seen some “positive” aspects, but the PHA does not seem satisfied because it had a certain timeframe to sell all the schemes. Only one year was given to the authority because the government had pledged to the HBFC that its loan of Rs one billion would be paid back within this period. But the situation does not promise that the target will be met. The only positive response has so far come from all the six sites in Islamabad where the booking of flats started even before the construction work.

The work on the scheme at Nassappa Payan, Charsadda Road, Peshawar, stopped a year ago and the work seems to have more or less been abandoned there. Not a single flat was booked in this scheme. Flats have been completed at Gulistan-i-Jauhar in Karachi, but Sindh government is yet to respond to the offer. Further work of laying of infrastructure stood suspended six months ago.

Almost similar is the case of two sites in Landhi. Except for the railway site adjacent to the University of Engineering and Technology, GT Road, Lahore, the work on the remaining six sites stood suspended about eight months ago. An engineer said that infrastructure work could start only when the government department paid the price and contractors bills were cleared by the PHA.

The PHA says another 15 to 18 months may be required to sell flats in the housing schemes across the country. The PHA, however, hopes that it will be able to sell flats because they have been built with top quality building material and the payment is to be made in 12 to 16 quarterly installments. It is offering a 10 per cent discount on making full payment and 5 per cent on 50 per cent payment. The minimum down payment is 20 per cent but possession is not to be given till half the price is paid.

Another good aspect of the bargain is that the installment once fixed will not be changed for the remaining years.

But what seems fishy are some conditions, spelled out on application forms. One such condition says that the PHA “reserves the rights to make appropriate changes/adjustments in the final sale prices and design of the apartments, to cater for escalation in prices”. Under another condition it also reserves the rights to “shift the allotment of the apartment at any stage due to any bulky sales deal with agencies/parties.”

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