World Bank calls for overhauling of HBFC

[Lahore_Real_Estate]

ISLAMABAD: The World Bank has called for overhauling the House Building Finance Corporation (HBFC) while showing concern that Pakistan was facing unprecedented challenges of acute housing shortages, unhealthy living conditions, and non-existent or dilapidated infrastructure across the country.

The report: “Expanding Housing Finance to the Underserved in South Asia,” points out that the lack of affordable housing is pervasive because of the exorbitant mark-up of interest rates, high real estate prices, and eroding incomes of middle-and low income groups.

The average national occupancy rate per dwelling is above six; density per room is 3.5 people, compared with the international standard of 1.1 per room.

The report also called for overhauling housing development regulations; providing infrastructure for residential development; improving the reliability of land administration, record, and titling; streamlining property taxes; rewriting urban rent laws; enforcing foreclosure laws; and promoting long-term funding to boost the overall demand for and supply of mortgage finance.

In the medium to long-term, the report proposed development of new financing mechanisms, including real estate investment trusts, municipal bonds and a secondary mortgage facility to deepen the housing finance market.

The mortgage debt-to-GDP ratio in Pakistan has risen to its peak of one per cent which highlights the huge untapped potential of the market.

Projecting future effective demand for housing finance, the report states that there was a demand of 470,000 housing units in urban Pakistan alone in 2009.

In addition to rising land prices, the cost of construction material has been increasing considerably, particularly those of cement and iron. Unavailability of developed land, coupled with the high prices of construction material, has compounded the problem of housing shortages in Pakistan.

A casual regional comparison makes it plain that construction costs in Pakistan are much higher than those in Bangladesh, India and Sri Lanka.

The urban share of the total population is already high at 37 per cent, and is projected to rise to 50 per cent by 2030. Annual city growth rates are high, ranging between 3.8 per cent and 5.5 per cent.

The report stated that the land administration system requires that the development agencies acquire land, develop it, and then sell it to public.

This system is plagued with legal and administrative burdens, which increases costs and time for delivery and reduces availability of developed land.

The national and local master plans are either inadequate or poorly enforced, and this had led to inefficient allocation of land and uncontrolled urban development. The root cause is lack of clear responsibility among a multitude of government institutions as well as a mismatch between expenditure and revenue responsibilities.