In a cabinet meeting held on April 12, the Planning Commission has proposed an allocation of Rs16.5 billion in the upcoming budget for the construction of 50,000 housing units for the low-income group under the Prime Minister’s Home Ownership Programme for Everyone (HOPE).
The meeting was chaired by Prime Minister Nawaz Sharif. The cabinet was apprised that urbanisation in Pakistan is one of the fastest in South Asia. As a result of this, its annual demand for housing units stood at 700,000. However, only 250,000 units could be constructed leaving a huge disparity between the demand and supply. Moreover, it was informed that the accumulated shortage has increased to around 10m units.
A senior government official is reported to have said that the cabinet was informed about the need for one-window facility for home developers.
The proposal stated that as many as 50,000 units should be constructed under the public-private partnership (PPP) mode with a special allocation of Rs8.58b while Rs8b should be allocated as a contingent liability after two years under the credit guarantee scheme for the risk coverage of banks.
It was also proposed that the initiative should target the salaried public and private sector employees initially, as no downpayment was required since people had the capital for schemes sponsored by the trusted developers.
Meeting participants also stated that the existing land should be optimally utilised and State Bank of Pakistan’s refinance schemes could be altered so as to reduce the government cost of the initiative.
Under a strategy, 100,000 houses would be planned in the first phase for which a specialised entity should coordinate, supervise, facilitate and innovate under the realm of PPP.
Pre-qualified reputable private-sector firms would be co-opted as partners through a co-branding mechanism.
A minimum of 20pc units would be reserved for affordable housing in each housing project.
The minister of planning, development and reform proposed three financing options for the initiative including markup subsidy on 20,000 housing units for the middle-income group, downpayment subsidy on 20,000 units for the lower middle-income group and underwriting of the risk by the federal government for bank financing for 10,000 units for the low-income group.
Other financing options included real estate investment trusts, launching HOPE savings bond/rupee-denominated investment bonds for Pakistani diaspora, balloting system or subsidies on construction input or tax breaks for the developers and contractors.
After detailed discussions, the cabinet formed a committee to be chaired by the minister of housing and works to present the final proposal before the cabinet for approval.
