It is estimated that there is a shortage of approximately 10m residential units in the country. The country suffers from several issues when it comes to developing the property market. Hindrances include improper land titling, which is often very obscure and unclear, illegal property development by societies that do not have necessary approvals from government bodies, shoddy regulation by authorities, and a lack of clarity around foreclosure laws from the courts, which has deterred banks from giving loans to borrowers keen to get on the housing ladder.
Pakistan’s real estate industry, which was in the doldrums since 2016, has finally seen a rebound in the past several months. 2021 has seen rapid growth in all ancillary industries as well. According to an Arif Habib report, year-on-year sales growth for the cement sector shows an increase of 71 percent and the steel sector by 41 percent. Looking at, to what extent the government’s construction package and the mortgage foreclosure law are driving this. We approached several experts working in the market to share their views on what is needed for Pakistan’s real estate sector.
Pakistan Housing sector issues:
Lt. General (r) Anwar Hyder
There is an acute shortage of housing in Pakistan. This inadequacy adversely affects the living conditions of millions of people, particularly those who fall in the financially underserved segment of the populace. Naya Pakistan Housing and Development Authority
(NAPHDA) was created to realize the Prime Minister’s vision of affording respectable living to the low and middle-income segments of the society. NAPHDA is not only pursuing the construction of low-cost housing all over Pakistan, in collaboration with federal and provincial housing and development authorities but is also creating enabling environment to facilitate large-scale construction of such housing by the private sector. The Authority, in collaboration with the State Bank of Pakistan, has also initiated a markup subsidy scheme to promote housing finance that is within easy reach of the low and middle-income people. The overarching concept is to enable all common citizens to own their houses through a mortgage, by paying easy installments which are almost equal to the monthly house rent that they pay. This initiative by the Prime Minister has not only revived the construction
industry and forty-plus allied industries but have also contributed towards large-scale job creation and overall economic growth.
Waseem Hayat Bajwa
Executive Director NAPHDA
The supply side for housing in Pakistan has never been addressed institutionally; thus, the Demand / Supply gap kept on widening. We have a shortage of over one million houses annually; hence the PM’s vision of 5 million houses is a justified stance. First time in history, the government endeavored to address this widening gap in an institutional manner. The primary issue was the availability of finances at low rates. By reducing discount rates, addressing the foreclosure issue, and forcing the banks to disburse 5 percent of private sector credit, the government has not only addressed the issue of demand, particularly of affordable housing but also revitalized the housing market as a whole.
Mr. Ahmed Ali Riaz Malik
CEO, Bahria Town Pvt. Ltd.
The national housing shortfall is over 10 million units, with the difference increasing by 350,000 units each year. Pakistan’s real estate market is the backbone of its economy, with more than 100 different industries depending upon it, making up around 2 percent of the GDP. The development of the real estate sector mainly depends on a flexible mortgage market, which had almost been nonexistent in our country. The government has already recognized this, with the government positioning it as an engine of economic growth. The real estate sector is also being seen as one with the most potential to attract investment from local and foreign investors, especially overseas Pakistanis. Bahria Town is “Asia’s Largest Private Property Developer”, our goal is to bring Pakistan on the list of developed countries, which is why Bahria Town offers the strongest infrastructure in the country yet caters to all the different socioeconomic classes of Pakistan. Over the past 23 years, with a 35,000 employees (direct & indirect) strong team, Bahria Town has never changed its core legacy of providing the customers with top quality products they need, regardless of the many economic fluctuations and social changes that have been faced over the years.
Zeeshan Ali Khan
CEO Zameen.com/ Co-founder EMPG (Emerging Markets Property Group)
It is clear then that the introduction of the mortgage facility in the country is absolutely imperative for the real growth of the housing market. There is also an urgent need for the country to make the shift from the informal market (cash) to a more streamlined and documented market. However, the challenge lies on the supply side which is being resolved albeit at a gradual pace; even though the banks are eager to solve this problem, the struggle is convincing people about the efficacy of the relatively new mortgage and home loan system. Other impediments to the mortgage market include a clear trust deficit between the banks and developers, as well as a lack of affordability due to floating interest rates. Resultantly, advances made by banks to the construction industry, which includes housing, stand at a meager 3 percent of the bank’s total net advances portfolio of PKR 8 Trillion. People need to be educated on the incredible potential of these loans for solving Pakistan’s housing shortage, which presently stands at a staggering 31 percent as a percentage of the total population. To put this into perspective, this figure is 13 percent and 20 percent higher than Bangladesh and India respectively. Therefore, it is evident that the best possible solution to bridge this gap is by further expanding the country’s housing finance facilities.
Founder of the Arif Habib Group
REITs are a highly regulated instrument. Regulators have to play an instrumental role in creating an enabling environment for REITs. SBP has taken the lead and has proactively enabled banks to participate in the market. I understand SECP is also in the process to amend REIT regulations. We believe FBR shall also play its due role and remove anomalies and disadvantages.
President & CEO, Bank Of Punjab.
Economy housing is a vast area where no or little work has been done in the past. However, now it has become a priority initiative and SBP is playing a pivotal role through policy interventions to ensure enabling mortgage financing environment. It doesn’t merely have a positive impact on multiple industries but would also have a very positive societal impact which is a must for sustainable growth.