The PTI government has been fast in announcing development projects aimed at helping and uplifting the most underprivileged sections of the population, with its ‘Naya Pakistan Housing Society’ as the flagship project. However, with virtually no observable work having been done on ground, it is unlikely to fulfil its purpose, that of providing affordable housing to the poorest. It is a sad irony that due to a continuous and unabated rise in inflation, construction costs have increased significantly, which means the government itself cannot afford to build subsidized homes. What is more, the uncontrolled rise in prices is much of the government’s own making. The target of providing 5 million housing units was already ambitious to begin with and the government has continued to increase the scope of projects to be constructed under the Naya Pakistan Housing & Development Authority (NAPHDA) since its inception almost two years ago by adding more cities where it would operate. With prices of both construction materials and labor rates going up by a whopping 40 per cent since 2018, a much more substantial subsidy than originally decided would have to be approved, which will be a difficult task considering how the International Monetary Fund (IMF) has tasked the government to reduce subsidies across the board as one of the major preconditions to revive the stalled $ 6 billion Extended Fund Facility (EFF).
Another important aspect of providing low cost housing is the involvement of the central bank and private banks who have to provide affordable finance to those looking to take advantage of the government’s scheme. To that end, the State Bank of Pakistan (SBP) had made it mandatory for banks to allocate 5% of their lending to projects under the NAPHDA at significantly lower than conventional market interest rates with no collateral other than the houses themselves, a risky loan for any bank especially in a market where the mortgage industry is practically nonexistent. The higher cost of building the houses coupled with a rising discount that is bound to be hiked further as monetary policy tightening continues, both the borrowing limit and interest will need to be revised. In the present scenario it seems unlikely anyone is going to benefitting from the government’s housing schemes any time soon.
