KARACHI: The chairman of Prime Minister Imran Khan’s flagship five million Naya Pakistan Housing Program (NPHP) said on Friday he was “hopeful” Pakistan would be able to renegotiate the International Monetary Fund's (IMF) call to the central bank to roll back financing measures imposed to boost the country's housing and construction sectors.
The South Asian nation has seen a flurry of activity in the real estate sector after Khan selected the construction industry as a catalyst to boost economic growth, and announced the low-cost NPHP scheme in 2019. The nation is offering subsidies for low-cost houses and banks have been asked to increase their credit exposure for the industry to 5% of their loan portfolios. The country saw multiple real estate investment trust offerings for the first time last year.
In April 2020 the government also announced a tax amnesty scheme that bars authorities from questioning investors, builders and buyers about their sources of income if they put cash in the real estate sector.
But in a staff report released along with a $1 billion tranche of a $6 billion loan program, the IMF this month “urged” the central bank to wind down housing financial measures “out of concerns for financial stability” and recommended focus on addressing long-standing structural deficiencies to support private sector lending, in particular on mortgages and housing finance.
Pakistan is currently facing a housing backlog of up to 11 million units, a figure that is expected to grow to 13 million by 2025, as per figures by property website Zameen.com.
“I am hopeful that the government will successfully negotiate with the IMF and the central bank’s measures will continue to support the housing sector in the country,” Zaigham Mahmood Rizvi, the chairman of the Naya Pakistan Housing Task Force, told Arab News. “The housing scheme is backed by a lot of hard work in terms of policymaking and the World Bank is also supportive of Pakistan’s housing initiative.”
A spokesperson for the central bank declined to comment on whether Pakistan planned to roll back the financing measures as per the IMF’s call.
In 2021, Pakistan witnessed unprecedented growth of 85% in banks’ outstanding credit for housing and construction. Lending increased by Rs163 billion, from Rs192 billion to Rs355 billion. Within the housing and construction portfolio, disbursements under the Government Markup Subsidy scheme, also known as Mera Pakistan Mera Ghar (MPMG), increased by Rs38 billion, according to the State Bank of Pakistan.
Analysts said rolling back the housing measures would be a “setback” for the country’s construction sector.
“If these measures are rolled back, it would negatively impact on the housing sector and would be a setback to the ongoing construction activities,” Abdul Azeem, head of research at Spectrum Securities, said. "The IMF in fact wants to increase the interest rate which is much lower than the market.”
“The federal government should outrightly reject the demand of the IMF to unwind two key measures for the promotion of housing and construction activities,” Mohsin Sheikhani, the chairman of the Association of Builders and Developers of Pakistan (ABAD), said. “If the demand of IMF is accepted by the government it will be the last nail in the coffin of Pakistan’s struggling economy.”
According to World Bank estimates, the real estate sector makes up 70 percent of national wealth. There are at least 40 other industries closely tied with the construction industry and 70% of unskilled labor works in housing and construction.
In the last fiscal year, the construction sector contributed 2.5 percent to the gross domestic product and engaged 7.71 percent of employed Pakistani labor force, according to the central bank.
