Private housing

The Naya Pakistan Housing Programme launched by Prime Minister Imran Khan on Wednesday is easily one of the most ambitious projects conceived by any government in Pakistan. It aims to provide five million houses for low-income individuals and families over the next five years and provide associated benefits of six million new jobs and the revitalisation of over 40 industries related to construction. If successful, this programme would be revolutionary and a model of poverty-reduction for the rest of the world. Alas, the question that always hovers over projects like these is that of financing. A conservative estimate of the costs of the Naya Pakistan Housing Programme is $180 billion over the next five years. This is more than the state can afford. The government has tried to explain this away by claiming that its only involvement will be in facilitating the programme and that private banks would be expected to step in by providing 15-20 year mortgages for 90 percent of the houses’ costs with the buyer putting in 10 percent as the initial down payment. If that is truly how the government intends to operate, then this programme is doomed for failure.

One of the biggest problems in the housing sector today is that banks are reluctant to provide home mortgages. For potential homeowners, the interest rates are too high to justify the cost of the loans. Even if there was a complete turnaround in this culture, the estimated cost of the Naya Pakistan Housing Programme is far larger than the total deposits in all private banks. A government spokesperson has claimed that the programme will be financed by putting an end to corruption and repatriating laundered money. The ability of the government to do this is doubted by many but should it even manage to succeed that still won’t make a difference since the prime minister has said the financing will be provided by private banks. This, in a nutshell, is the problem with the government’s performance so far. No one doubts its good intentions but it raises expectations to unrealistic levels and justifies its ability to deliver with voodoo economics. There is much the government can do to reform the housing sector. It could start by regularising informal settlements and giving their residents legal rights. The government should also directly construct housing for low-income citizens. What it should not do is raise the bar for success so high that there is no way it can reach it.