Housing and Physical Planning

3. Performance of the Formal Sector in Housing

3.1 Actors in the formal sector housing drama

The formal sector in housing consists of various government development and housing loan giving agencies at the federal and provincial levels; local bodies such as municipal and district councils and committees and entrepreneurs and private individuals who operate within the legislative and planning framework established by the state for promoting housing and related infrastructure.

The Federal Ministry of Planning and Development: The ministry prepares the five year plan which establishes the broad policy directions and allocates a budget for them.

The Environment and Urban Affairs Division (EUAD) of the Ministry of Housing and Works: The department frames the National Housing Policy and develops the necessary arrangements to facilitate its implementation.

The Provincial Physical Planning and Housing Departments: These departments develop housing in smaller towns which have no urban development authorities and for the rural areas. Most of their schemes are self-financing but in recent years they have received substantial financial support from the provincial governments, especially in the Punjab.

The Urban Development Authorities: These are statutory bodies in the larger cities and function under the control of the provincial physical planning and housing departments. They are in-charge of policy making within the parameters set by the federal and provincial governments, with regard to urban issues. In addition, they implement policy decisions, and wherever they exist, they are the major developers and marketers of land for housing. Most of their housing related financial needs are raised through land development and its sale. In the Punjab, the development authorities are also in-charge of katchi abadi regularisation and improvement.

Municipal Corporations/Town Committees: These are urban local bodies and they have a political and an executive wing. The political wing is the elected council or committee headed by the mayor or committee chairman and the executive wing consists of the bureaucrats and professionals of the provincial local government department. These municipal bodies are responsible for the maintenance of services in the smaller cities and in all cases for the maintenance of the road network, solid waste management and drainage. In Sindh, the municipal bodies are also in-charge of katchi abadiregularisation and improvement.

Water and Sewerage Authority (WASA)/Karachi Water & Sewerage Board (KWSB): These are autonomous bodies in-charge of operating and maintaining water supply, sewerage and drainage. KWSB is Karachi’s equivalent of WASA and is in-charge of bulk water production for Karachi and for establishing and maintaining sewerage systems and plants. WASA/KWSB raise revenues through consumer charges. In addition, they receive assistance from the federal government as well.

Cantonment Boards: They control large areas in the metropolitan cities. They are in-charge of local development, operation of services and maintenance of their areas. They raise finances through conservancy charges, property tax, development charges, lease charges and various other types of fees, such as for building permits.

House Building Finance Corporation (HBFC): The HBFC is a federal housing bank which does mortgage financing against land. HBFC therefore caters only to the middle and upper middle class who can afford the cost of developed land. HBFC’s investment as part of the total annual housing investment in the country, inclusive of short-term loans at high interest rates from commercial banks, is less than 20 percent.

Private Developers: Most of the private developers operate in the larger cities and provide housing and/or developed land to the middle and high income classes. Almost all of their development is financed by advance payments from their clients and much of the land on which they build is either allotted to them at below market prices, by the urban development authorities, or purchased at public auctions arranged by the development authorities. The private developers do not cater to the lower income groups due to the poor paying capacity of these groups and hence smaller profit margins.

Individual Builders: The vast majority (according to one estimate over 70 percent) of houses built in Pakistan are built by individuals through contractors or artisans and financed almost entirely by their own resources or through loans from non-formal sources.

3.2 Formal sector performance

The formal sector has not been able to fulfill even 10 percent of the annual demand for housing during the last Five Year Plan period (1983-88). During this period 430,000 plots were developed and about 400,000 housing units were constructed ¹. Over 80 percent of this development had some involvement of the public sector in it either through provision of developed vacant plots or through part financing of individual units by the HBFC.

The Seventh Five Year Plan envisaged the development of 4,708,000 housing units in the plan period 1988-93. However, calculations show that the formal sector does not have the capacity of providing more than 1,355,000 units during this period ². This works out to an annual supply of about 270,000 units against a demand of over 875,000. The Seventh Five Year Plan document accepts that due to the increase in population and urbanisation the demand supply-gap will increase during the plan period. However, the plan does not suggest any radical or innovative manner in which the housing issue can be tackled and advocates the strengthening of the present formal sector support systems to housing and related institutions.

As mentioned earlier, the major part, about 65 percent of the housing demand is for low income groups and it is mainly this demand that is not met by the formal sector for a variety of reasons that are discussed later in the paper.

4. Urban Sector Issues

4.1 Urban sector projects

a) Urban development authority schemes

Most housing schemes developed by the urban development authorities have so far been on state owned land. The initial sale price of the plots on these schemes has been well below their market value. In addition, the scale of development has been far too small to have any impact on the housing situation, except in Karachi where the state developed over 160,000 plots in a decade since 1974.

For example, in Lahore alone, there is a backlog of 150,000 units with an additional annual demand for 27,000 units. The Lahore Development Authority (LDA), however, has been able to add no more than 2000 plots/built units per year over the last decade. Conditions in Multan, Faisalabad, Peshawar, Hyderabad and Quetta are far worse ³.

In all urban development authority schemes about 66 to 75 percent plots are of 120 square yards and below. These are cross subsidised by higher prices for larger plots in some schemes. However, allotment is through computer ballot and given the high cost of these plots, the low income groups for whom they are meant do not apply for them. Thus, the speculators and middle income groups benefit from these subsidies. Consequently, these schemes lie empty for speculative purposes or are occupied by middle income families. As a result the problem of housing the lower income groups remains.

b) Area development schemes

Area development schemes have been developed by the provincial physical planning and housing departments. The only substantial provincial programme has been that of the Punjab government which has developed 117,000 small plots in 79 towns since 1972. This works out to an average of 6,500 plots per year against a Punjab demand of over 78,000. Most of these schemes have been occupied though not necessarily by the target group. There was a great demand for plots in these schemes as the cost of a developed plot was only Rs 3,000 per marla ⁴. 85 percent of the plots in these schemes were of 5 marlas or below and as such ostensibly meant for low income groups. The low cost of the plots was possible only because of the easy availability of state of shamlaat lands ⁵.

c) The 3 marla schemes

The 3 marla scheme concept was developed as part of the Five Point Programme of the Junejo government. In 1988, development of 88,000 plots was proposed, the major bulk of which was in the Punjab where 29 schemes were to be developed, one in each district headquarters. Only 15 schemes were commenced as state land in appropriate locations was not available in 14 districts and the local authorities did not have the finances to purchase land on the open market. None of these 3 marla schemes are as yet complete. The programme, meanwhile, has been temporarily shelved, having met not even 15 percent of its target ⁶.

4.2 Issues

The main issues that arise out of the government and formal private sector initiatives in providing land for housing, especially for the urban poor are; i) the small scale of the projects as compared to the demand; ii) the failure to cater to the intended target group and; iii) the high cost of acquiring land on the open market.