Housing backlog: Govt should urge FIs for concessional mortgage loans (Daily Times (Pakistan))

Pakistan is facing an overwhelming housing backlog primarily due to lack of availability of house financing facility, according to experts.

According to the House Building Finance Corporation (HBFC), the shortfall is currently estimated to be up to 9 million units, with only around 3.5 million units being added in a year leaving a shortfall of 5 million units.

Pakistans best real estate website, Lamudi Pakistan, has investigated this issue and possible solutions. The Association of Builders and Developers (ABAD) said that the government should ask financial institutions (FIs) to provide mortgage loans for house construction below market rates.

ABAD also proposed that the State Bank of Pakistan should set up a House Refinancing Window for long-term funds from multinational agencies. House refinancing means paying off the current mortgage with a new one, which could be done for a variety of reasons such as to lower interest rates, or to invest money in other real estate. In addition, the organisation urged the government to remove taxes on the construction industry and lower stamp duty and registration fees to one percent, which would not only increase documentation but also be a source of revenue generation.

Lastly, ABAD has proposed that first-time buyers should not be made to pay property taxes. Instead the total cost of the property should be assessed and the relevant income tax should be charged in three annual instalments.

Dr Noman Ahmed, Professor and Chairman of the Department of Architecture and Planning at NED University, in a recent article on housing challenges in a newspaper, says that housing finance is a vital catalyst to curb the housing backlog issue. He has suggested the HBFC should introduce innovative packages to increase its client base and expand housing access to those in most need of financial support.

Furthermore, he suggested provincial governments should establish housing resource centres at district level, which would then provide information about public and private sector housing options. Pilot projects for developing housing on a cooperative basis for low-grade employees should be undertaken, he said.

Lamudi Pakistan Country Director Saad Arshed said, “The supply and demand situation in the housing market is highly skewed which leads to an untapped market for the low- and middle-income segments. Moreover, he said, financial institutions need to be more proactive in this regard and increase mortgage to GDP ratio, which currently stands at one percent compared to other developing and emerging markets – such as seven percent in India, 12 percent in China, 29 percent in Malaysia, 32 percent in Singapore.

He added that Lamudi realizes the need for promoting mortgages and has launched an online loan calculator on its website in collaboration with Dubai Islamic Bank. This provides an easy-to-use platform for online house-hunters to apply for mortgages and fulfil their dreams of owning property.