PAKISTAN is currently grappling with a housing deficit of approximately 10-12 million units. The annual demand for housing stands at 350,000 units, out of which only 150,000 units are being constructed in urban areas. Considering an average family size of five members, it can be inferred that a significant portion of the population, potentially around 50-60 million people, may be living without adequate housing. However, further investigation is required to ascertain the veracity of these claims and determine if there is a deliberate emphasis on highlighting the significance of the housing market.
Regrettably, in Pakistan, think tanks, policymakers and scholars often fail to construct their narratives on the solid foundation of data. Instead, discussions and policy initiatives rely heavily on estimations, reports from esteemed institutions or the words of renowned figures. To challenge these prevailing misconceptions, Pakistan Institute of Development Economics under RASTA project has released baseline study titled “Power, Profits and Plans.” This literary work stands apart by presenting a comprehensive analysis that is entirely grounded in real-time data, aiming to dispel prevailing myths and enhance informed decision-making.
Let us unravel the myth surrounding Pakistan’s colossal housing deficit. It is widely claimed that the country grapples with a staggering shortfall that a staggering 60 million people are left without shelter. Is this truly the case? The answer, based on concrete evidence, resounds with a resolute no. The United Nations estimates the slum population in Pakistan’s urban areas to be around 32 million and by the year 2025, approximately 50% of the country’s population will be residing in urban areas.
Astonishingly, a mere 17% of the population has access to rental housing, a stark contrast to the 30-60% range found in developed and other developing nations. For instance, India stands at 30% and Japan at 39%. This begs a crucial question: Where do the remaining individuals reside, those who neither have rental accommodations nor dwell in slums? Their plight, living without adequate housing, lingers as an unsettling mystery.
Let us now consider the affordability aspect if the annual requirement of 350,000 housing units were to be met. The estimates put forth in the book highlight that 62% of these homes are needed by lower-income households, earning a modest Rs 27,120, while 25% are needed by lower-middle-income households with earnings up to Rs 113,000. However, when we examine the income and savings margins of both groups, factoring in a backdrop of 25% annual inflation, it becomes clear that they cannot afford houses, apartments or portions.
This is primarily due to the minimum per square foot prices in prominent cities such as Islamabad, Karachi, Lahore and Peshawar which stand at Rs 24,000, Rs 16,400, Rs 17,000 and Rs 16,000 respectively. Additionally, even the 62% of individuals who require houses do not possess the financial means to afford the rental charges which typically range from Rs 20,000 to Rs 30,000 in under-developed areas of these cities. In a stark contrast, the ratio between the cost of land and construction in the housing industry presents a striking dichotomy. Currently, it stands at an imbalanced 70% for land and a mere 30% for construction. However, if this ratio were to be reversed, the industry would have the potential to generate substantial value for the economy.
In a similar vein, significant disparities exist in both land ownership and population density within cities. Take Karachi, for instance, where a mere 40% of the population, consisting of the upper-middle and elite classes, claim a staggering 77% of the city’s land, resulting in a population density of 84 individuals per hectare. Conversely, the remaining majority occupies a mere 23% of the land, accommodating a much higher population density ranging from 1500 to 4500 persons per hectare. This pattern extends to cities like Lahore, Faisalabad and Gujranwala, where the top percentile of the income distribution occupies 58%, 57% and 60% of the land, respectively. An example of this disparity can be seen in DHA Multan which spans a vast 38.4 square kilometres, surpassing the land area of Sheikhupura (24 sq km) and Rahim Yar Khan (34 sq km).
At the institutional level, a concerning trend has emerged, one that fosters urban sprawl, a car-centric culture and a disregard for the essential qualities of a city. Shockingly, a total of 1083 projects from various developers, amounting to a staggering Rs 342 billion, were registered and granted under amnesty schemes. However, only a mere 210 projects, aiming to provide three million housing units for the poor, were registered and out of those, a paltry 48 proposals, encompassing a mere 70,000 units were approved.
As the purchasing power of the lower and lower-middle classes diminishes due to the relentless high inflation, the demand from these segments continues to decrease. Given these circumstances, one must question who will step forward as buyers for the annual production of 150,000 housing units. Furthermore, the housing market is plagued by a majority of investors rather than end-users, resulting in a surplus driven by real estate financialization and a speculative bubble fuelled solely by investor demand, disregarding the needs of actual residents.
The State of Pakistan finds itself at a crossroads, where the social contract between the government and a staggering 87% of the population, unable to afford decent housing, lies shattered. To confront this urgent predicament, it becomes paramount to initiate a comprehensive census, enabling the acquisition of real-time data that unveils the true depth of the crisis. This must be followed by rigorous research aimed at unearthing viable solutions to burst the bubble of unaffordability plaguing the housing market. Furthermore, the government should take heed from the past, drawing inspiration from successful subsidized housing programs implemented in the 1960s and 1970s. By introducing similar initiatives, assistance can be extended to those who find themselves trapped in the clutches of inadequate housing, rekindling the flickering hopes of a secure and dignified shelter for all.
—The writer is an Assistant Professor (PhD Financial Economics) at the National University of Modern Languages, Islamabad.
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