Naya Pakistan Housing Project is one of the ambitious schemes that Prime Minister Imran Khan has set his mind to, having announced a Rs30 billion subsidy for it in July, urging investors to take advantage of the reduction in taxes, and trying to leave avenues for the construction industry. This week, as the Housing Project moves into the first phases of execution, Naya Pakistan Housing and Development Authority (NAPHDA) Chairman Lt Gen (r) Anwar Ali Hyder announcing that six commercial banks that form the consortium for financing the project would start giving loans, it is helpful to look at the scope of the project.
If successful, the Naya Pakistan Housing Project could reap a lot of benefits for the country, the most apparent one being to provide housing to lower-income groups. Yet there are several complications that the government should look into. In Pakistan, housing financing by banks is 0.2pc, compared to 90pc in Europe. While Imran Khan correctly identified this issue and has attempted to resolve it by incentivising banks and investors, there needs to be proper monitoring of the policy around loans as well.
The government has promised low-interest rates for the loans. According to government officials, the banks were facing problems in providing soft financing for the houses on a low-interest rate but the government has taken drastic steps to ensure the provision of house-financing loans at 5 to 7 percent interest rates. While this is important to ensure that housing stays affordable and feasible in the long run, a big issue still is the term of these loans. The length of time afforded for them to be paid back, any deductibles if that length is exceeded, and a well-thought-out plan for repayment also needs to be sketched out so that lower-income groups are not exploited. While increasing ownership of homes is a great way to uplift social mobility, we have all seen how badly housing markets can crash—every step of the plan needs to be considered.