Social Housing Construction Company: Concept Note

1. Realities

• Karachi requires 80,000 housing units every year for its growing population, backlog and replacement. The formal sector provides no more than 30,000 housing units. The demand-supply gap is met by the creation of katchi abadis on state land, densification of inner city low income areas or remains unmet. At present, more than 50 per cent of the city’s population lives in katchi abadis. Statistics for the rest of Pakistan’s urban areas are worse than for Karachi.
• There are no social housing programmes for low and lower middle income groups except for the Katchi Abadi Improvement and Regularisation Programme. This programme addresses the katchi abadi issue only and not the issue related to the creation of huge low income informal settlements created out of the subdivision of agricultural land.
• The city, provincial and federal governments own large tracks of land both within the city and on its periphery. This is being encroached upon by a mafia of formal and informal developers and is fast disappearing.
• There is considerable liquidity in banks and leasing companies and interest rates are relatively low. These financial resources are not being channelised into housing for lower and lower-middle income groups.
• Social housing in the past has not reached poor communities because it was unaffordable to them and the land and housing allotment process lent itself to speculation and acquisition by other than target groups.
• The only effective social housing components that have been developed in Pakistan that reach loo income communities are through the work of the Orangi Pilot Project-Research and Training Institute, Saiban and the Urban Resource Centre, Karachi. All the three institutions are based in Karachi.

2. Recommendations

• It is recommended that a public limited construction company for social housing (initially operating in Karachi) be formed in collaboration with the city government and an association of banks and leasing companies willing to give mortgage loans for social housing to lower and lower-middle income families.
• The Board of Directors of the company should consist of the stakeholders (representatives of city government, leasing companies/banks) and reputable professionals and social workers in the housing field.
• The city government should provide land free of cost for development and/or negotiate land from the provincial and federal governments at low rates.
• Banks and leasing companies should provide long term mortgage loans to groups of ten to twenty low and lower-middle income families for purchasing land and housing at affordable prices. Lending to groups rather than individuals makes speculation difficult and ensures better repayments.
• The construction company will build the houses. To reduce costs land will not be costed as part of the payments that are to be made. In addition, for low income families the houses will be finished externally but internal finishes and accessories will be the responsibility of the owners. This will reduce cost considerably.
• Terms and conditions will be developed to ensure that the target groups are the beneficiaries. Terms will also be developed to make speculation/resale of property difficult and unprofitable for a minimum of 15 years.
• To reduce costs revision of bye-laws and zoning regulations for social housing in Karachi will be undertaken.
• It is estimated that in the first year, if projects are properly developed, 50,000 housing units can be built in the city.
• If the programme is successful in Karachi, it can be expanded to other urban areas of Pakistan.