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| August 24, 2006 | Thursday | Rajab 28, 1427 |
Housing units insufficient in Punjab, says ADB
RAWALPINDI, Aug 23: The sluggish growth in the number of housing units has led to increased crowding of houses in the Punjab province despite somewhat faster growth in income, says a report of the Asian Development Bank (ADB).
The number of housing units in Punjab increased merely by two per cent between 1980 and 1998, compared to three per cent per annum in other provinces.
In contrast, the number of persons per housing unit in other provinces has declined. The population in the Punjab was growing at 2.5 per cent per annum compared to 2.6 per cent in other provinces, says ‘the Punjab Economic Report’ of ADB.
Construction has the potential to be one of the most dynamic sectors of Pakistan’s economy. However, the shortage of housing units in the country is estimated to be around five million units, indicating that this sector has considerable untapped growth potential, says the report.
According to the report obtained by Dawn, the total national investment in housing, at around Rs150 to Rs160 billion per annum, contributes less than one per cent of the GDP.
Historically, the state-owned Housing Building Finance Corporation has provided the bulk of housing finance. However, even at its peak, annual credit by formal financial institutions has never exceeded 1.5 per cent of total housing investment compared to around 25 to 50 per cent in South East Asia and the United States respectively.
The report points out that a culture of wilful default along with procedural complications encountered by financial institutions have deterred the private sector from venturing into housing finance activities. High interest rates throughout the 1990s have also restrained the demand for credit, prevailing interest rates are now at their lowest levels ever, it says.
While addressing the biggest problem constraining the development of the housing finance sector - the difficulties in enforcing foreclosure laws in the event of a default is largely outside the purview of provincial governments - the federal government has recently taken several important steps in this regard.
The improved performance of banking tribunals, along with enactment of the 2001 finance institutions (Recovery of Finances) Ordinance provide some hope that challenges of foreclosure have been addressed effectively through strengthening of legal framework and debt recovery procedures.
The eventual development of a secondary market in housing finance, leading to the introduction of tradable mortgage-backed instruments whereby primary lenders can securitize their mortgage holdings for re-sale to other investors, will give an additional fillip to this sector, the ADB report says.
ADB emphasised that the provincial government could also play an important role in addressing a number of other key legal, fiscal and administrative barriers hindering faster development of the housing and construction sector.
In addition, disposal of land owned by the government in prime commercial locations and being used for less productive purposes (or leased out to the private sector at nominal rents), will help better exploit the potential of this scarce asset, and thereby stimulate private construction activity, improve land utilisation and mobilise revenues for all levels of government.
A number of actions within the provincial government’s control were proposed in the report.
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