Official sources told Business Recorder that Minister for Planning, Development and Reform Ahsan Iqbal gave a detailed presentation on the project in the previous meeting of the federal cabinet. Before the start of the presentation, the minister for housing and works apprised the cabinet of different achievements of his ministry. He informed the cabinet that his ministry and its attached organisations have undertaken more projects within the tenure of this government compared with all the previous governments combined.
According to him, the Federal Government Employees Housing Federation has, since its establishment, provided/built 64,400 plots/apartments, out of which 41,400 units were launched during the last two years; Pakistan Housing Authority has so far constructed 6,000 apartments all over the country, out of which 1,000 were launched in the last two years; and the ministry has also set up an Apna Ghar Company with the mandate to work in public private partnership (PPP) mode; however, the company could not become operational for different reasons.
The Prime Minister appreciated the work done by the Ministry of Housing & Works and directed to remove any bottlenecks that has impeded the working of its different organisations. After initial comments by the minister for housing, the minister for planning, development & reform made a presentation on HOPE. The cabinet was informed that Pakistan was the fastest urbanising country in South Asia where the annual demand for housing is 700,000 units, while only 250,000 units are being constructed on an annual basis; and due to this deficit, the accumulated shortage has increased to around 10 million units.
The cabinet was further informed that challenges in housing lag on supply side was due to high prices, issues relating to affordability, low access to financial services including housing mortgage, high mark-up and variable rate, and complex regulatory framework. Successful case studies of public sector initiatives, ie, Malaysian, Turkish, Singaporean and Indian models were also shared with the cabinet.
The cabinet was apprised that in order to capitalise on the opportunity offered by urbanisation, there are four fundamental areas for policy action: governance, finance, connectivity and planning, land and housing (zoning and land utilisation) as well as resilience to natural disasters and the effects of climate change; that the existing planning permission/approval regime for launching a housing initiative was complex and time consuming; and that it took around two years before an NoC could be issued for initiating development work in any scheme, while the incumbent government's objective should be to set up a one window platform where these processes could be completed within sixty days.
The minister for planning further apprised that the current initiative aims to introduce government supported schemes for developing affordable housing for low-income/lower middle income and middle-income groups, encourage private sector's participation in the housing market by introducing PPP schemes/projects, and to transform slums all over the country, and the process would start from the federal capital.
He shared strategy for the initiative with the federal cabinet, according to which 100,000 houses would be planned in the first phase for which a special purpose entity would be required to co-ordinate, supervise, facilitate and innovate in the realm of PPP in which pre-qualified reputable private sector firms would be co-opted as partners through co-branding mechanism; and that minimum 20 per cent units would be reserved for affordable housing in each housing project.
He proposed three financing options for the initiative; the first option proposed mark-up subsidy on 20,000 housing units for middle income group, the second was down payment subsidy by the federal government on 20,000 units with the instalments paid by the lower middle income group, while the third option proposed that the federal government should underwrite the risk for financing 10,000 units by the commercial banks for the low-income group. Other financing options such as Real Estate Investment Trust (REIT), launching HOPE Savings Bond/ Rupee denominated HOPE investment bonds for Pakistani diaspora, file/balloting system or subsidies on construction inputs and/or tax breaks to developers and contractors were also presented. The need to identify potential lands available with the federal and provincial governments as well as their departments/agencies and to develop a Land Bank was also emphasised.
The cabinet was informed that to launch the initiative, Apna Ghar Company should be activated with the reconstitution of its high-powered board chaired by the Prime Minister. One window facility should be launched for the developers, 50,000 housing units should be constructed in PPP mode with special allocation of Rs 8.58 billion, while Rs 8.0 billion should be allocated as contingent liability after two years under credit guarantee scheme for the risk coverage of banks.
While appreciating the HOPE model, it was pointed out that the initiative should target salaried public and private sector employees in the first instance; that down payment under the initiative was not required as people had the capital for schemes sponsored by trusted developers; that mortgages, so common in the western countries, would not work in Pakistan in the absence of a foreclosure law without which the defaulters of bank housing loan could not be evicted; and that there was need to create an enabling environment for the private sector. It was mentioned that existing land use should be optimised and State Bank refinance schemes could be customised to reduce government cost for this initiative and sovereign guarantee by the government was not required as insurance was normally inbuilt in the repayment plans of commercial banks.
It was mentioned that government should learn from the experience of other countries; the cost of land should be factored in while calculating cost of the project; and that interest rate should be carefully worked out due to its variability and long duration of the payback period.
The Prime Minister appreciated the minister for planning, development and reform for his work and pointed out that creating an enabling environment is part of the ease of doing business exercise that his government is currently undertaking. He said that no country can progress if it takes two years in obtaining clearances for developing a housing project and initiative should especially focus on the poor; and that though it may take several years to complete this Initiative, his government would be committed to lay the foundation for it.
The Prime Minister further observed that while making a final proposal, financing should be made on low mark-up and availability of appropriate infrastructure and standardisation should be ensured while selecting site for the project; and all execution related activities should be well-planned and coordinated.
Copyright Business Recorder, 2017