Setting Foundation for Social Empowerment Prime Minister’s Low Income Housing Program A commendable Initiative Seeking strong and Fast Track Implementation Apna Ghar Housing Setting Foundation for Social Empowerment March 2, 2015

PM’s Apna Ghar program Emergent Initiatives xx Apna Ghat Ltd: Since the announcement of Apna Ghar program in mid 2013, the work done so far is setting up of Steering Committee and five Working Groups. The Steering Committee had finalized its set of recommendations in Oct. 2013, which have been adopted by Apna Ghar Ltd for implementation and Way-Firward. Other initiatives needed in Pro-Poor Housing: Rural Housing Program Housing Microfinance Program Solar/Alternate Energy solution for Pro-Poor Housing Mortgage Guarantee Program Strengthen Housing Finance Function: Apna Ghar Program is likely to need housing finance in the range of Rs 600 Billion. Govt. alone can not take that financial burden, except for interest subsidy. A pro-active role is needed to be ensured by SBP, Commercial banks, HBFC etc so that such massive long tern funding could be arranged through market based sources. Issue: So far the slow progress is due to absence of stewardship with responsibility and authority. Answer: Since now its stewardship has been assumed by the Board of Apna Ghar Ltd, xx

Pakistan: Low-Income Housing CHALLENGE For a population of 190 mn, household size of 6.6 and population growth rate of 2.5%, the incremental demand for housing for new household is 0.7 mn units per year. Urban population is nearly one-third of the total population. With changing socio-economic norms, household size will shrink from 6.6 to lower levels, leading to more demand for housing units for the same population. (India 5.6) Overall housing backlog is 8-9 mn The Urban Housing Shortage is around 3.0-3.5 mn, nearly all of which is in the Economically Weaker Section (EWS) of the population. The yearly housing supply is around 0.25-0.30 mn, therefore, short supply is adding another0 0.3-0.4 mn every year to the existing backlog every year. Depletion of old housing stock will further widen the shortage. The Rural Housing Shortage is 5 mn units, being neglected so far. Rural Housing calls for a different approach to address the issue of Housing Supply and Housing Finance. 3

PM’s Low Income Housing Program-PMLIHP 1,000 satellites having 500 units each The Housing Program addresses the low-income housing shortage from three different aspects: Demand Side (Shelteress Poor Housing Finance), Supply Side (RE Developer Industry) and Regulatory aspects (SBP, SECP, Building Codes Regulations, Fiscal/Tax Regulations of FBR). Housing has three market segments: Market Housing: People with affordability who are being attended by market forces. Not a target market for the Program Squatter Settlements – Rehabilitation/Resettlement of squatters and discouragement of further squatter settlements. Under the new Housing Policy being proposed the Govt. will also launch programs to address this segment as well. Social Housing: Low-Income Pro-Poor Affordable Housing, needing Government support. THIS IS TARGET MARKET of PM Low Income Housing Program

Housing Supply Targets (No of Housing Units) Year-1 Year-2 Year-3 Year-4 Year-5 Total Public-Public 10,000 20,000 30,000 40,000 50,000 150,000 Public-Private PM Program 75,000 100,000 125,000 500,000 Sub total (Govt) 85,000 120,000 130,000 140,000 175,000 650,000 Private-Private* 315,000 380,000 470,000 660,000 825,000 2,650,000 Grand total 400,000 600,000 800,000 1,000,000 3,300,000 * The Private Sector is currently supplying housing units at 300,000 per year and it needs to be facilitate/enabled to enhance its production over the years, totally on market basis. 5

What is needed to be done: Apna Ghar, a commendable Initiative Seeking Strong and Fast Track Implementation Actions taken so far: Steering Committee and its 5 Working Groups had worked out set of recommendations, Policy and Business Plan in Oct 2013.. Apna Ghar Co. Ltd, as vehicle to deliver on the program has been registered and its Board of Directors is now functional. The Board of Directors of Apna Ghar Ltd, in its second meeting, has adopted the set of recommendations of the Steering Committee and of 5 Working Groups for onward implementation and move forward. What is needed to be done: Housing is a Provincial subject sine land is a Provincial Subject. Procurement and development of Land for development of housing under different modes including PPP Mode. Execution of Low-Income Housing Program (LIH Program) would involve different stakeholders, both at the Federal and Provincial level Regulatory Agencies like Fiscal (FBR), Finance (SBP), and Building Control Authorities are to taken on board etc. Set up a lean but strong function at MoH to execute, monitor and facilitate Apna Ghar Ltd for execution of the Program

Steering Committee for PM LIH Program For the purpose the Govt. had set up a high level Steering Committee, headed by the Finance Minister. The Steering Committee had set up five Working Groups to address issues and answers in the related areas, which are: Working Group on Policy, Planning and Building Codes Working Group on Housing Finance & Fiscal Incentive Working Group on Private Sector Participation and Innovative Models Working Group on Legal Reforms Governing Housing Sector Working Group on Land Identification, Allocation and Notification

Regulatory Role of SBP, SECP and other Stakeholders: SBP to be directed to play a pro-active and effective role in promotion of housing and housing finance, with a target to improve MD:GDP Ratio from 0.5% to 5% within 5 years. SBP to complete various regulatory initiatives in hand which are essentially needed for successful implementation of housing mission of the Government. SBP and MoF to ensure that HBFC and Commercial Banks are fully geared to play their due role in providing housing finance to the beneficiaries/clients under APNA Ghar Program Housing specific Prudential Regulations SBP to ensure fast-track launch of Mortgage Finance Guidelines, Housing Microfinance Regulations and Guidelines, Pakistan Mortgage Refinance Co, Long Term Liquidity Instruments like REITS, Mortgage Backed Securities and Developer Finance Regulations

Regulatory Role of SBP, SECP and other Stakeholders: The SECP, as a regulator of the corporate sector, is to play a proactive role in promotion and regulation of housing supply agents like Developer Industry, Construction Materials Industry etc. SECP to launch Real-Estate Regulatory Authority/Regime: In Pakistan currently there is no specific regulatory regime for establishment and monitoring of Developer Industry in Pakistan. SECP to launch Real Estate regulatory initiatives under process like Real- Estate Regulatory Regime, Guidelines on Private-Public Partnership, Guidelines on Property Valuation etc. Guidelines on Private-Public Partnership Business Models, and development of Standardized PPP Contracts Guidelines on Property Valuation, Title verification, registration, Transfer etc Alongwith other areas, the regulations should ensure that Residential Housing Projects are delivered as per approved specifications and time schedule 9

Role of Developers and Academia Developer Industry to play a key role in production of Low-Income Housing on manufacturing scale production to provide economies of Scale. Developers to maximizing use of Role of Construction Technology and innovation and standardization of Construction Materials. The Developer Industry may need to have technology transfer under joint ventures with large scale developers in the region Developers may also develop and promote Low-Income Housing Schemes outside PM’s LIH Program To enhance role of Universities and Academia in finding economical solutions for Low-Cost Housing, the Govt to set up Housing and Urban Development Departments at Universities. The Govt to set up Housing Information System ( Housing Observatory The National Policy on Slums to cover policies and programs on slums rehabilitation and resettlements

Role of other Stakeholders Role of FBR: Fiscal support to low-income housing by way of lower Income Tax, Sales tax, Levies etc Role of Building Control Authorities: Relaxed regulations like FARs for Low-Income Housing, Fees etc Role of Architects and Civil Engineering Designers Role of Urban Planners in Housing: Urban planning to cover development of new habitat, social and physical infrastructure etc. Developers Associations: Involve them in planning and development through Private Public Partnership etc.

Housing Microfinance, Women Empowerment Pakistan needs Housing Microfinance Supply and Finance Institutions, and a HMF Regulatory Regime Currently there is no Rural Housing Finance Program. The Banks and ZTBL, NRSP etc to be geared to play a lead role for the purpose. In order to ensure effective participation of women in low income housing program of the Government, Govt. can ensure equality and empowerment of women in all housing activities and policies. For women empowerment, in houses where the property title is in women’s name or where she is a joint titleholder, the government should further subsidize interest rates. APNA Ghar Housing Schemes may be equipped with Solar and alternate energy solutions, cost of which to be merged with monthly mortgage payments. 12

NATIONAL URBAN RENEWAL/ REGENERATION PROGRAMME Major metropolitan / cities in Pakistan are faced with massive urbanization leading to mushroom growth of illegal habitats / slums / Katchi Abadies. A considerable number of government owned housing settlements in major urban centers have been converted into slums due to lack of maintenance. All housing in these areas is horizontal in design. These settlements are located in central locations having real estate value among the highest in the world. National Urban Renewal Plan to be prepared focusing on a strategy which may include smart land use planning, vertical housing/mixed development, development of commercial area enabling the government to meet increasing housing demand. Under PMLIHP the existing government owned housing settlements will be replaced by walkable apartment blocks (ground+4 stories). The additional housing units could be allotted to retiring government employees/low income families. Affordability through Efficient Land Use, Smart-Subsidies and Cross-Subsidies 13

Role of HBFC and Commercial Banks May be directed to play an active role in housing and housing finance for lower and high income segment housing. Commercial Bank’s lending for Low-Income Housing, to be made by SBP the Priority Lending segment, as is in India, Thailand etc. HBFC to be put on track: HBFC, established in 1952 as a specialized housing finance institution to serve Small and Lower-Middle Segments of Society. During last few years HBFC has lost track of the very purpose it was established, that is housing finance to low and middle income segment of population. Its yearly loaning is much less than its operational expenses Such specialized housing finance institutions proudly successfully operate around the globe and more so in Asia-Pacific region e.g., HDFC- India and GH Bank, Thailand. Indeed HBFC needs to be made a viable and sustainable entity to continue, being the only institution in the country to serve shelterless poor with a wider financial inclusion and geographical spread. 14

Solar and Alternate Energy for PM’s LIH Housing Other Initiatives Solar and Alternate Energy for PM’s LIH Housing Promote large scale Rentable Housing Housing as an Asset Housing as Investment Sponsor a Shelter Foundation for Poor of the Poor Promote Community Housing Programs Mortgage Guarantee Program for LIH Labor Colonies and Student Hostels Schemes 15

Emergent Initiatives needed by Apna Ghar Ltd Complete legal formalities as per Corporate Law to make its business within the law. Induction of market based professional staff in the Company. Availability of needed funds to Apna Ghar for commencing business. Procurement of Land, and equip the “raw land” with External Infrastructure including Physical Infrastructure (Roads, Transport, Communication etc.), Social Infrastructure (Health, Education), and Economic Infrastructure (Income and Employment etc.) Develop business models for construction like Private-Public Partnership. Mechanism to ensure availability of market based long term funding for the projects. Criteria for selection of Developers under different modes. Development of standardized Contracts for execution with the Developers, based on international best practices. Criteria for selection of beneficiaries/clients, and mechanism for ensuring transparency in selection. Define Low-Cost Housing and ensure recognition of the definition. Initiate dialogue with different stakeholders like SBP, FBR, Building Control Authorities, and other related agencies on what support AGL would need from them. Dialogue with Provincial Authorities on smooth execution of the projects. Approach International Agencies like World bank, IFC, ADB, DFID etc. for Technical and Financial Assistance.

Low-Cost Affordable Housing Issues we know, Answers we need Zaigham M. Rizvi zaigham2r@yahoo.com Secretary General: Asia-Pacific Union for Housing Finance- APUHF (www.apuhf.info) Housing Consultant World Bank, UNHABITAT, CMHC-Canada, ShelterAfrique Senior Advisor Housing Encludes, Washibngton-USA (ShoreBank Int’l ) Advisor Housing, State Bank of Pakistan