Naya Pakistan took its first concrete step Wednesday by laying the foundation to build 20,000 homes with Rs100 billion, in Islamabad Rawalpindi Quetta and Lahore as part of its ambitious plan for five million in five years.
“The government never had the money for five million houses,” said Prime Minister Imran Khan at the ceremony in Islamabad. “The private sector had to make them. But that journey has started.” Six projects will be by the Federal Government Employees Housing Authority and one will be executed by the Pakistan Housing Authority Foundation.
As the PM so candidly put it, the government will never be able to build enough houses on its own. That is why housing finance is a crucial part of this plan that has been mostly put together by Zaigham Rizvi, who heads the Naya Pakistan Housing and Development Authority and is a housing expert who used to work with the World Bank.
Rizvi’s interaction started with Imran Khan before he was prime minister. He worked to include housing in the PTI’s manifesto and Imran Khan even visited the Association of Builders and Developers in Karachi before he was elected. In December Zaigham Rizvi spoke at a SSUET jubilee celebration seminar in Karachi about how the government planned to get the job done.

The big picture: housing in Pakistan
Zaigham Rizvi first explained that we need to understand that our country’s size is going to stay the same, but its population is going to grow. “The more people we have the more we will need shelter,” said Rizvi. Demand for land is always on the rise to produce food, clothing, shelter, which are basic social needs. 
Pakistan’s population
1970 = 58,000,000
2019 = 208,000,000
By the turn of the century it is projected to exceed 375m but the land area will remain the same at 882,000 sq km.
The PTI manifesto and now the government’s policy is to provide affordable housing and for the first time in the history of Pakistan include rural and peri-urban housing. A Housing Task Force was set up to see how institutional, administrative and legal arrangements would be made.
They set a target:
Rural areas = 400,000 housing units a year
Peri-urban areas = 200,000 housing units a year
Urban areas = 400,000 housing units a year
(The targets may have been revised since, but we provide the numbers here to give a sense of how the government was thinking).
The policy was to also provide housing for lower-middle, low-income people and improve, rehabilitate and resettle slums, katchi abadis. 
According to conservative estimates, Pakistan has over 19m housing units but is short of 11m units, according to Prof. Dr Noman Ahmed, who is the Dean of of Architecture and Management Sciences at NED University, who also spoke at the SSUET event. “Our population is increasing 1.4% nationally and our cities are going to get larger,” he said. By 2030 half of Pakistan’s people will be living in cities and cities are not prepared.
Ten of our largest cities house 85% of our total urban population. “Household sizes are multiplying. We have more nuclear families and as families divide, the need for housing goes up,” he said.

Paying for housing
The problem is that in Pakistan housing finance is not keeping up with the market’s needs. Zaigham Rizvi pointed out a startling statistic: Pakistan’s mortgage debt-to-GDP ratio is so low that we don’t even feature on global charts. The World Bank chart is issued yearly. But because Pakistan’s is less than one percent (0.3%) we aren’t even big enough to be counted.
This is why Prime Minister Imran Khan said this on Wednesday, March 11, 2020 at the ceremony: “In America and England, 80% of houses are built with bank financing, mortgages. In Malaysia it is 30%. India is 12%. But Pakistan is 0.2%”
In essence, banks in Pakistan do not lend people, especially poor people, money to build their houses.
The main bank that is supposed to do this is the House Building Finance Company or HBFC. Zaigham Rizvi pointed out that it was formed in 1952 to focus on poor people. It used to give 30 loans a day, but now barely gives five, he said. On the other hand, India’s HDFC, formed in 1978, gives more than 1,000 loans a day.
Banks don’t give poor people loans because they don’t have any assets they can mortgage as collateral. So there are no credit facilities for the urban poor in the formal banking structure. Credit is essentially tied with collateral, which excludes all those who do not possess any land title or proof of ownership for land. Loans of small amounts are not granted by financial institutions which is a shame because the urban poor usually need loans of a few thousand rupees only. Some micro finance options are opening up, though with enormous caution. In the meantime, we see that in Pakistan land has become a commodity that is transactable in the market. It is no longer considered a social asset.
Many of these housing ventures we see are just “investments”, not housing. “If you visit neighbourhoods across Karachi you’ll find that tens of thousands of apartments are not occupied because their owners are away and only bought them to keep. Like money in a bank,” said Dr Noman.
As everyone knows, only the rich can afford land, get loans and build their houses. The poor are as a result pushed to the peri-urban areas on the fringes of cities. “Formally accessed housing is much lower than informally accessed housing,” he said. “This is why katchi abadis grow. And even today they absorb population.”
Rizvi said that they were keenly aware that Pakistani villages do not have housing finance. “I come from a village outside Sialkot,” he said. “And I went to my village after 56 years and was shocked. That village is a slum. City slums are better than village slums.”
And so, he said, the Naya Pakistan Housing and Development Authority drew up these plans according to target:

Rural housing = 400,000 a year 40% of target
Cost upper limit up to Rs500,000
Finance limit up to Rs400,000
Suppliers: community-based self development
Financiers: Zarai Taraqiati Bank Ltd, commercial banks, Akhuwat Islamic microfinance and other eligible NGOs

Peri-urban areas 200,000 a year
Cost upper limit =  Rs1.5 million
Finance upper limit = Rs1.2 million
Suppliers: Private developers
Financiers: Banks 

Urban areas 400,000 
Cost upper limit to Rs3 million, land area up to 120 sq yards or 5 marla, covered area 850 sq ft
Finance up to Loan-to-Value ratio: 90:10
Suppliers: Private sector
Financiers: Banks 

Middle income 
Cost upper limit Rs3 million to Rs10 million
Finance limit: Loan-to-Value ratio: 90:10
Suppliers: Private sector
Finance banks: SHFIs

The NPHA is making these recommendations as well: There should be a land and housing appraisal at the district level to act  as the baseline inventory of housing. Land disposal and regulation mechanisms need to be developed. They believe that each district should have a housing resource centre. These ideas can be piloted in Karachi, Lahore, Rawalpindi, Islamabad and the Planning Commission has already endorsed this idea. 
Furthermore, the HBFC could venture into new avenues such as community mortgage programs, housing credit assistance to public and corporate organisation employees, support to bankable housing projects in the private sector and options of drawing funds from the public through permissible financial channels.