Experts Urge Launch of Affordable Housing Finance Scheme to Address Housing Deficit

Real estate authorities have highlighted the critical need for the government to implement an accessible and economical housing finance initiative in collaboration with commercial banks. This measure is aimed at stimulating construction activities, attracting foreign investment, and fostering sustainable economic expansion, particularly as Pakistan grapples with a housing shortage exceeding 10 million units.

Such a low-cost housing finance scheme would not only provide a boost to the construction sector but also be a catalyst for substantial foreign direct investment, which is essential for Pakistan in addressing its current foreign exchange challenges. It is anticipated that this initiative will tackle the escalating housing deficit, energize construction efforts, and act as a pivotal force in the country’s economic recovery.

A few years prior, the State Bank of Pakistan (SBP), along with commercial banks, introduced an affordable housing finance program known as ‘Mera Pakistan Mera Ghar,’ offering mark-ups between 3-9 percent for the initial decade. The program garnered considerable public interest, with banks processing housing finance requests totaling over Rs 473 billion, of which approximately Rs 212 billion was successfully disbursed. However, the scheme faced abrupt discontinuation in June 2022, and since then, there has been an absence of new affordable or subsidized housing finance options.

Dr. Anosh Ahmed, a real estate expert and investor based in the United States, has noted that the decline in the key policy rate, driven by inflation, presents a chance for the government to initiate a low-interest or subsidized housing scheme. This initiative would bolster the construction sector, which has links to more than 60 related industries. The program should be accessible to both resident and non-resident Pakistanis to encourage increased foreign exchange inflow into the nation.

He further suggested that the government should provide subsidies on the mark-up for housing finance and ensure its sustained continuation, akin to the Export Finance Scheme (EFS) and the Long-Term Finance Facility (LTFF), to offer continuous support to the construction and housing sectors.

Dr. Ahmed also lauded the federal government’s decision to eliminate the Federal Excise Duty (FED) on property transactions. He described this as a constructive and encouraging measure for the construction industry, anticipating that it will not only aid domestic construction but also pave the way for foreign investment.

He added that alongside tax reductions in real estate, the government should devise a subsidized housing finance scheme that will yield economic benefits and generate significant revenue returns through various taxes. He stated that the growth in construction activities will also create tax income for the government, exceeding the subsidy amount on mark-ups under the proposed scheme.

The housing finance scheme is projected to enhance the mortgage-to-GDP ratio, which is currently less than one percent—the lowest in South Asia—and attract increased remittances from Pakistanis living abroad, as stated by Dr. Ahmed.

He emphasized the necessity for the current administration to enhance and rebrand the existing housing scheme, reintroducing it to the public, similar to the continuation of initiatives like the Roshan Digital Account and the Sohni Dharti Remittance Programme.

The government has recently introduced an interest-free loan program for young individuals relocating abroad, along with the Prime Minister’s Youth Business and Agriculture Loan Scheme (PMYB&ALS).

Dr. Ahmed believes that the housing finance scheme will benefit both resident and non-resident Pakistanis, attracting previously undocumented capital into the economy, along with foreign investment from both local and international housing development firms due to rising housing demand in the country.

He also proposed that the government should facilitate construction and developers in attracting foreign investment to establish residential communities in various Pakistani cities.

Given Pakistan’s recent experience with high inflation, many individuals find it increasingly difficult to afford homeownership. A government-supported affordable housing finance scheme would offer much-needed assistance, enabling low- and middle-income families to realize their dreams of owning a home. With declining interest rates, the government is ideally positioned to introduce such a scheme and enhance housing accessibility for the general population, he concluded.