Economic growth: Govt should introduce affordable housing finance scheme: experts
KARACHI: With Pakistan facing a housing deficit of over 10 million units, real estate experts have emphasized the urgent need for the government to introduce an affordable, low-cost housing finance scheme in partnership with commercial banks in order to boost construction activities, attract foreign investment and achieve sustainable economic growth.
The low-cost housing finance scheme would not only boost the construction industry but also attract significant foreign direct investment, which Pakistan urgently needs to address its ongoing foreign exchange crisis. They believe such an initiative would not only address the growing housing shortage but also boost construction activity and serve as a key driver of economic revival across the country.
The State Bank of Pakistan (SBP), in collaboration with commercial banks, launched an affordable housing finance scheme titled Mera Pakistan Mera Ghar a few years ago with a mark-up ranging between 3-9 percent for the first ten years. The initiative received an overwhelming response from the public, with banks receiving housing finance applications totalling over Rs 473 billion, of which nearly Rs 212 billion was disbursed. However, the scheme was abruptly suspended in June 2022, and since then, no new affordable or subsidized housing finance scheme has been introduced.
Dr Anosh Ahmed, a US-based real estate investor and expert has said that with key policy rate is on the decline due to inflation, there is an opportunity for the government to launch a low-interest or a subsidies housing scheme to support the construction industry, which is linked to over 60 allied sectors. The scheme must be for residents and non-residents Pakistanis to bring more foreign exchange in the country.
The government should subsidize the mark-up on a housing finance scheme and ensure its continuity on a long-term basis, similar to the Export Finance Scheme (EFS) and the Long-Term Finance Facility (LTFF), to provide sustained support for the construction and housing sector, he added.
Anosh Ahmed also welcomed the federal government’s decision to abolish the Federal Excise Duty (FED) on the purchase and sale of properties. He termed it a positive and encouraging step for the construction sector, stating that the move will not only support the domestic construction industry but also open the door to foreign investment.
With the cutting down taxes on real estate, the government should also come up with a subsidized housing finance scheme that will generate dividends in the economy and pay back handsome revenues against subsidies through multiple taxes, he added. “The growth in construction activities will also generate tax revenue for the government, which will be more than the amount of the subsidies on mark-up under the proposed scheme”, he said.
The housing finance scheme will also improve the mortgage-to-GDP ratio from less than one percent, which is the lowest in the region of South Asia at present, and it will also attract additional remittances from expatriates residing in different countries, Anosh Ahmed added.
He emphasized the present government should improve and rebrand the previous housing scheme and introduce it again for the general public like other schemes have been continued from the past, including Roshan Digital Account and Sohni Dharti Remittance Programme.
The government recently introduced an interest-free loan scheme for youngsters moving to different countries. It also launched the Prime Minister’s Youth Business and Agriculture Loan Scheme (PMYB&ALS).
Anosh Ahmed said that the housing finance scheme will facilitate resident and non-resident Pakistanis and attract undocumented capital in the economy, besides attracting foreign investment from local and foreign housing developer companies with the rising demand of the houses in the country.
He also suggested that the government should facilitate construction and developers to bring foreign investment for setting up residential societies in different cities of Pakistan.
As Pakistan has experienced high inflation in recent years, many people can no longer afford to buy a home. A government-backed affordable housing finance scheme would provide much-needed relief, enabling low- and middle-income families to become homeowners. Moreover, with interest rates now on the decline, the government has an ideal opportunity to introduce such a scheme and make housing more accessible for the masses, he concluded.