Malik Ashraf
AFTER the launch of its flagship project of
Naya Pakistan Housing Programme under
which five million affordable housing units are envisaged to be built for lower income segments of the society, the government has taken yet another commendable step for providing interest-free loans for low cost houses. Agreement to this effect was signed between Ministry of Housing and Works and Akhuwat Islamic Micro Finance recently. Under the scheme loans up to Rs one million will be given to the poor people, returnable in 24 to 60 installments. In addition to the construction of houses, these loans can also be used for building additional rooms, kitchens, washrooms and renovation purposes. There will be no fee on processing the applications. The government reportedly has provided Rs five billion to Akhuwat Finance for the purpose and this amount can be increased on need basis. This initiative reflects commitment of the PTI government to take care of the poor and under-privileged segments of the society that lack the resources to build their own homes,
Food and shelter are the most inescapable basic human needs and owning a home is dream of every individual and family. The states with a welfare creed and agenda strive to ensure that all the people living within its territorial limits are provided with some kind of shelter called a home according to their needs and range of affordability. The issue of housing has economic, social and political dimensions both for the families owning the house and for the government pursuing this strategic goal. For the political parties vying with each other for political power by winning the franchise of the people housing invariably is an important issue and a great catalyst to their electoral victories. PTI’s rise to power among other things also owes to a great extent to its manifesto promising ten million jobs and five million housing units for the lower and lower-middle income groups by playing a role of enabler and facilitator. Pakistan faces an overall backlog of 11.2 million housing units with a shortage of four million and 7-8 million in the urban and rural areas of the country. Building five million houses over the next five years which constitutes almost half of the total shortage of the housing units is surely a big task. To accomplish this Herculean undertaking the government would have to work with unruffled commitment with the support of all the stakeholders including banks, developers and allied industries by creating adequate incentives for them to participate in the effort which also involves enhancing the mortgage debt to GDP ratio through effective fiscal measures. It is also important to ensure that the mortgage installments to be paid by the prospective aspirants are financially feasible and affordable for them.
The PTI government, particularly the Prime Minister, has taken great interest in getting the scheme rolling and chaired several meetings since coming to power to finalize its contours and other related issues. It is beyond doubt that the public has shown tremendous interest in the scheme. According to the task force on five million housing units, the total estimated financing requirements for building five million houses stands at around Rs 16 trillion. Out of the total cost of Rs 16 trillion 20 per cent will be borne by the house owner while the remaining 80 per cent will be provided through bank borrowings. The task force also made certain recommendations for successful implementation of the scheme including: adoption of rent equalization model; charging ten per cent mark-up on bank loans of two million payable over a period of 20 years with a monthly installment of Rs 18564; asking banks to increase limit for housing finance up to five per cent of total loan portfolio and reduction of tax burden on banks on the portfolio allocated for housing finance and increase in capital adequacy ratio for banks. Hopefully the proposed legislation will take care of all these issues.
It all seems very encouraging and indicates the seriousness and commitment of the PTI government to implement this flag-ship project. Only time will reveal what will be the final outcome but the beginning is quite auspicious. The successful implementation of the scheme as envisioned will unleash huge economic activity in the country which will not only reinforce the building industry but would also help in the emergence of down the stream industries besides creation of thousands of jobs. The multiplier effect of this huge investment will accrue infinite impetus to the economy as a whole. This will however depend on timely implementation of the scheme, ability of the government to raise required finances and the resolution of all the related issues including finding lands with clear entitlement to avoid unnecessary litigation. Owning a house for an individual and a family means an investment whose value keeps increasing which helps create the buying and reinvestment power known as equity; Home ownership also stabilizes other home-related expenses like utilities and gives the owner more control over his ability to make investment in his property which keep those expenses down; it helps create sustainable future in many different ways and a long-term plan significantly reduces living expenses as they move towards a retirement budget; staying in one’s own home instead of a rented accommodation allows financial and emotional investment in the owned living space and community; Staying put for longer periods of time also creates social benefits that range from friendship with neighbours to community involvement and consistent educational opportunities for children. In some societies it also means social recognition and prestige.
— The writer is freelance columnist based in Islamabad.
Interest-free loans for low cost houses
