World Bank approves $435mn in loan for low-cost housing projects

ISLAMABAD: World Bank (WB) has approved $435 million loans for three projects including Pakistan Housing Finance Project, Punjab Urban Land Systems Enhancement, and Punjab Affordable Housing programme to facilitate low income groups.

However, independent economists have opposed WB’s estimates over shortages of housing units in Pakistan. Moreover, the land record projects in Punjab, already implemented in the province, have actually created more difficulties for the common man.

According to the multilateral lender’s announcement, the WB’s Executive Board approved three loans as these projects will expand access to housing finance, particularly for low-income households, improve land tenure rights and facilitate affordable housing developments in urban Punjab.

“Affordable and accessible housing is in high demand in Pakistan, which is home to over 200 million people and is the most urbanised country in South Asia,” said Najy Benhassine, World Bank Country Director for Pakistan.

“These projects will contribute to addressing housing needs, particularly for low-income households, by leveraging the private sector and by facilitating access to mortgage options for those who currently cannot access financing to buy a home. They will also strengthen property rights and increase the supply of climate-resilient, affordable housing developments.”

The $85 million additional financing for the Pakistan Housing Finance project will help expand access to affordable mortgages to increase homeownership among low-income households, including women and informal workers. The additional financing will scale up the credit risk-sharing facility launched in 2018, to provide partial credit guarantees to banks, in order to incentivise them to lend to borrowers traditionally excluded from commercial financing. This will benefit up to 70,000 first-time homebuyers in the country, who qualify for the Government’s interest rate subsidy programme - Mera Pakistan, Mera Ghar (My Pakistan, My Home).

According to the WB’s project document, the development objective of this project is to increase access to housing finance for households, and support capital market development in Pakistan.

This was achieved by filling a key gap in the long-term finance market through the establishment of Pakistan Mortgage Refinance Company (PMRC).

This project provided support to help get PMRC off the ground through $60 million in subordinated debt and $70 million in lines of credit (LoC) for low and middle income households.

It also included a pilot Risk Sharing Facility (RSF) of $10 million, established as a Trust, to encourage lending to low and informal income households.

PMRC is now a vital part of the housing finance ecosystem in Pakistan; it has partnered with twenty-four financial institutions (banks, Islamic banks, micro-finance banks, MFIs and DFIs). Additionally, PMRC has undertaken six capital transactions through which it has raised Rs10.3 billion ($63.2 million).

The $150 million Punjab Urban Land Systems Enhancement project will strengthen land administration and facilitate housing authorities’ efforts to identify suitable areas and public lands for affordable housing developments in the Punjab province.

The project will support the provincial government in upgrading its land registry by creating a digital, province-wide inventory of lands and deeds. It will help secure land tenure and streamline procedures for land-related permits – which are essential for private sector investment, housing finance and tax revenue collection.

The project will also generate geospatial data and risk information to inform urban planning and disaster risk management strategies for natural hazards such as floods.

More than 38 million people are expected to benefit from land registration, which will not only improve tenure security, but also formalise land and property ownership.