Sustainable and Affordable Housing Infrastructure
Sustainable and Affordable Housing Infrastructure
Business Model Description
Invest in the construction of affordable housing units across Pakistan, under a Public-Private Partnership (PPP) model, with a cross-subsidy to cater to the shortfall of housing units. The investment ecosystem is in collaboration with Naya Pakistan Housing Development Authority (NAPHDA). Examples of companies active in this space are:
Reall has been working for over 30 years on building affordable homes. In Pakistan, Reall, through joint venture with Ansaar Management Company (AMC), has financed housing projects in Faisalabad, Lahore and Peshawar. As of 2022, USD 13 Million have been invested to house 929 women and children, with overall 1270 people housed with improved water and sanitation facilities. (8)
Reportedly, considerable success has been realized in developing an agreement with House Building Financial Corporation (HBFC) Bank to provide mortgages for AMC’s clients, with many now receiving these mortgages, and in setting up employee-owned housing schemes with Sitara Chemical Industries Ltd. AMC is also a member of the government’s Affordable Housing Panel. (8)
Expected Impact
The IOA will provide affordable housing to 0.1 million families every year, spread over rural, peri-rural and urban areas.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Pakistan: Punjab
- Pakistan: Punjab
- Pakistan: Punjab
- Pakistan: Sindh
Sector Classification
Infrastructure
Development Need
As per the 2017 census, Pakistan's housing stock is 32.2 million, of which 39 per cent is urban. The urban population is expected to grow by 2.3 million per year over 20 years. As of 2018, the need was for ten million additional housing units with improved quality as currently, households are overcrowded with people living in informal settlements, and with inadequate access to basic infrastructure and services. (1).
Policy priority
Prime Minister's Construction Package of USD 485 Million was announced for the construction industry. It includes tax relief, deregulation policies, reduction in capital gains tax, reduction of sales tax on construction materials, and amnesty policies. State Bank of Pakistan's policy for low-cost housing provides incentives as well as targets to banks (2).
Gender inequalities and marginalization issues
Women work as unskilled as well as skilled workers in the infrastructure sector and are 19 per cent of the total workforce in this sector. According to the survey conducted by International Labour Organization (ILO), skilled and unskilled women workers reported that the working environment was not supportive, hindering their participation in this sector. (3)
Gender inequalities and marginalization issues
Women and children are the most impacted population segments due to the displacement caused by natural and man-made disasters. The August 2022 floods have resulted in the loss of 2 million homes, exacerbating vulnerabilities, especially for women and children (3)
Investment opportunities
The country’s construction industry accounts for 2.53 percent of Gross Domestic Product (GDP). The sector employs 7.61 percent of the employed labor. Gross Fixed Capital Formation (GFCF) in private sector grew by 20.6 percent between 2019 -20. (2)
Investment opportunity's introduction
Private sector GFCF amounted to more than 95 percent of the total. As of 2018, there is a need for additional ten million housing units in Pakistan demonstrating a clear opportunity for investments in this sector. (2)
Key bottleneck's introduction
The sector faces bottlenecks such as limited public investment in infrastructure and lack of access to finance to private sector as working capital as well as expansion of their business models. Demand side access to finance to make housing affordable for population segments with highest needs is also a bottleneck to growth of this business opportunity. (4)
Real Estate
Development need
Due to 2022 floods housing infrastructure losses amounted to USD 5.6 Billion. (5) There is a need to build resilient as well as affordable housing in order to meet the growing population demand as well to aid the recovery and reconstruction post 2022 floods.
Policy priority
The Board of Investment, has identified ten sectors as "Priority for Investment", out of which "Housing and Construction" is one of the priority sectors. (2) Naya Pakistan Housing Development Authority (NAPHDA) ensures resilience in terms of structural elements, foundations, filler slabs for ceilings of house. (6)
Gender inequalities and marginalization issues
Due to discrimination and inequality in housing, many women and girls live in insecure, undignified and unsafe conditions, at increased risk of homelessness and violence. Forced evictions and other violations of right to housing, disproportionally impact women, and reinforce existing inequalities, representing barrier to gender equality. (7)
Investment opportunity's introduction
Opportunities exist in public private partnership with National Highway, CPEC infrastructure development, housing construction with Naya Pakistan Housing Development Authority (NAPHDA) (2). NAPHDA aims to add 5 million new housing units (40 percent housing units are planned for urban areas, 40 percent for rural areas and 20 percent for semi-urban areas).
Key Bottleneck's
Both the supply and the demand sides must work well for housing market to perform well. On Supply side incomplete land records make it difficult for developers to buy land and for banks to underwrite mortgages. On Demand side lack of affordable mortgages makes it hard to buy a house. (4)
Home Builders
Pipeline Opportunity
Sustainable and Affordable Housing Infrastructure
Invest in the construction of affordable housing units across Pakistan, under a Public-Private Partnership (PPP) model, with a cross-subsidy to cater to the shortfall of housing units. The investment ecosystem is in collaboration with Naya Pakistan Housing Development Authority (NAPHDA). Examples of companies active in this space are:
Reall has been working for over 30 years on building affordable homes. In Pakistan, Reall, through joint venture with Ansaar Management Company (AMC), has financed housing projects in Faisalabad, Lahore and Peshawar. As of 2022, USD 13 Million have been invested to house 929 women and children, with overall 1270 people housed with improved water and sanitation facilities. (8)
Reportedly, considerable success has been realized in developing an agreement with House Building Financial Corporation (HBFC) Bank to provide mortgages for AMC’s clients, with many now receiving these mortgages, and in setting up employee-owned housing schemes with Sitara Chemical Industries Ltd. AMC is also a member of the government’s Affordable Housing Panel. (8)
Business Case
Market Size and Environment
> USD 1 billion
5% - 10%
The government aims to add 5 million housing units with per unit cost of USD 10,500.
According to government estimates as of early December 2020, 389 projects worth USD 1 Billion have been registered with the government to take leverage the tax benefits enacted in the construction package. (9)
Population growth, migration from rural areas, and the deterioration of existing homes is driving the shortage of housing in urban areas. The housing gap in Punjab - Pakistan’s largest province by population - was estimated at 2.3 million units in 2017 and is expected to skyrocket to 11.3 million units by 2047. (10)
Indicative Return
> 25%
> 25%
As per Naya Pakistan Housing Development Authority's estimates, with facilitation offered by the government, private sector has submitted 317 proposals under the Naya Pakistan Housing and Development Authority (NAPHDA) for construction of more than 3 million housing units. In 2021, around 45,000 Low-Cost Housing Units were under construction including Punjab Peri Urban Housing Scheme. (13)
As per Economic Survey 2021, private sector credit observed an expansion. One of the sectors that posted higher credit expansion include the Construction (USD 0.14 Billion). In Mar-Jul 2022 Building sector had unprecedented growth of 64.3 percent as compared to 17.2 percent in same time previous year (14)
Investment Timeframe
Medium Term (5–10 years)
Estimates for investment timeframe is based on inputs from NAPHDA for time required for land acquisition, build, sale and ownership transfer to retail consumers. (13)
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Capital - Requires Subsidy
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
The influx of people to cities, coupled with rising land prices, cost of construction material, impact of climate change, and the lack of adequate public-sector resources and capacity has resulted in growing rates of informality, inequality and substandard housing. (16)
A critical component to adequate housing is affordability, requiring that families do not need to choose between housing and other necessities. Adequate housing reduces vulnerability to economic, social, health and climate related shocks and disasters. (16)
The need for housing units in just Punjab province has been estimated to be 2.3 million but is expected to skyrocket to 11.3 million by 2047. (4) Post 2022 floods, 780,000 houses have been destroyed and 1.27 billion partially damaged. This translates into an immediate need for housing options (17)
Gender & Marginalisation
According to UN Women, more than 50 percent of urban women and girls in developing countries live without access to clean water, adequate sanitation, durable housing or sufficient living area. (18)
Women often lack security of tenure and equal rights to land and property due to inheritance laws, customs and traditions, making them dependent on male family members. In many developing countries like Pakistan, women spend more time supporting home-based activities that are unrecognized and unremunerated, leaving them with little to no savings to acquire assets like housing. (18)
Under Sharia and the law of the land, women in Pakistan are entitled to inherit and own property of their parents and husbands however, the prevailing social structures keep the women from accessing their rights to such assets. Violation of these laws carries imprisonment ranging from 5 to 10 years, along with a fine, or both. (19)
Expected Development Outcome
Investments deployed through the PPP arrangement are expected to help develop 5 million affordable housing units supporting poor households in rural, urban and semi-urban areas. With households accessing a key asset such as affordable housing, cascading impact on improved expenditure on healthcare and education is expected.
Gender & Marginalisation
Since women account for 50 percent of the population, and the gap in ownership and inheritance of property and land has been an issue, the business model through selection of applicants can facilitate and prioritize women's asset ownership.
By ensuring improved working conditions and wages that are at parity across the value chain for affordable housing, developers can promote improvement in quality of participation of women in this space.Low and lower middle-income households stand to benefit through access to affordable housing that leaves them with more disposable income for other essential needs such as health and education.
Primary SDGs addressed
1.4.1 Proportion of population living in households with access to basic services
47 percent of urban population lives in 9 major cities and 50 percent of the population lives in slums and squatter settlements due to housing backlog. (20)
Providing 5 million affordable housing unit under the PPP mode to decrease the proportion of population living in slums.
11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing
47 percent of urban population lives in 9 major cities and 50 percent of the population lives in slums and squatter settlements due to housing backlog. (20)
Providing 5 million affordable housing unit under the PPP mode to decrease the proportion of population living in slums.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
In low-cost housing, inferior raw material used in construction by the contractors can cause risk of breakage or safety issues for people residing in the buildings. Additionally, if sustainability factors are not considered in the construction and maintenance of housing units, the project development can lead to significant environmental damages and affect Pakistan's NDC commitments.
If the housing industry value chain is not bolstered by low-cost financing and insurance options, the purpose of securing safe, affordable and sustainable homes for Pakistan's citizens will be defeated.
If the properties are not direct transfer of ownership, there is risk that women will continue to be excluded from benefits of home ownership.
Impact Risks
There are concerns in Pakistan over acquisition of land for development of housing projects. The acquisition of agricultural land is highly discouraged and will defeat the purpose of sustainability.
While calculating the impact, there is a risk of inclusion restriction of women into the housing programs thus limiting their access to the programs.
Impact Classification
What
Reduction in the housing backlog and reconstruction due to floods with 0.1 million houses made available to families every year just by collaboration with NPHDA.
Who
Increased availability of affordable housing units along with increased employment opportunities across the industry's value chain, especially for women.
Risk
Increased risk of contribution of CO2 emission if the construction process does not adopt.
Contribution
Initiatives in the affordable housing space can benefit millions of homeless people in Pakistan that constitute 9 percent of the total population. (21)
How Much
There will be a contribution of 5 million housing units to reach the pre flood housing need assessment of 10 million housing units.
Impact Thesis
The IOA will provide affordable housing to 0.1 million families every year, spread over rural, peri-rural and urban areas.
Enabling Environment
Policy Environment
Prime Ministers Construction Package: A package of USD 485 Million was announced for the construction industry. This included tax relief, deregulation policies, reduction in capital gains tax, reduction of sales tax on construction materials, and investor amnesty policies. (2)
The Board of Investment, after provincial and nation-wide consultation with the private sector, has identified ten sectors as "priority for Investment", including "housing and construction" as one of the priority sectors. (2)
Financial Environment
Financial incentives: Revised mark-up study for housing finance (for potential house buyers - demand side incentive), Construction sector amnesty ordinance 2021. Cross subsidy to developers and builders under NAPHDA Mandatory Targets to bank for housing and construction finance. (26)
Fiscal incentives: The government has provided extension to avail Incentivized Tax Regime, Package for construction sector (supply side incentives). (26)
In case of special case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises (27)
Regulatory Environment
Naya Pakistan Housing and Development Authority Act 2020: An Act to provide for housing and real estate development and other activities related lo land and construction through the establishment of Development Authority (22) Housing Finance Prudential Regulations 2017: These regulations create an enabling environment for banks/DFIs to increase outreach of housing finance.
Timeline Approval Notifications No. SO(I&C-I) 5-18/2020. As per ease of doing business program regulations have been amended to reduce time for approval of applications (23) Timeline Approval Notifications No. SBCA/Secy to DG/2021/18 (24) As per ease of doing business program, regulations have been amended to reduce time for approval of applications in Sindh.
Standardization of building codes for low-cost housing building codes across the country have been standardized. (25)
Marketplace Participants
Private Sector
Graana, Zameen and other private sector entities in real estate. Developers: Bahria Town, Capital Smart City. Builders: Habib Rafiq Pvt Ltd, Habib Construction Services, Zameen Developments, Principal Builders
Government
Naya Pakistan Housing Development Housing Authority, Lahore, Karachi, Peshawar, Rawalpindi Development Authorities.
Multilaterals
World Bank Group and Asian Development Bank.
Non-Profit
Association of Builders and Developers of Pakistan (ABAD), Chambers of Commerce and Industries, Hands and AMC, Akhuwat. Kashf Foundation.
Public-Private Partnership
National Rural Support Program (NRSP). NAPHDA with private state development firms.
Target Locations
Pakistan: Punjab
Pakistan: Punjab
Pakistan: Punjab
Pakistan: Sindh
References
- (1) Mohammad Iqbal. (2021). “State of housing sector in Pakistan.” https://www.pakistangulfeconomist.com/2021/01/11/state-of-housing-sector-in-pakistan/. Accessed March 2023.
- (2) BOI (Board of Investment). “Housing & Construction”. Prime Minister’s Office, Board of Investment Housing and Construction Profile. https://invest.gov.pk/sites/default/files/boi/Housing%20and%20Construction.pdf?gtranslate=en.Accessed 28 March 2023.
- (3) ILO (International Labour Organization). 2011. “Baseline Study to Access Gender Disparities in Construction Sector Jobs.” https://www.ilo.org/wcmsp5/groups/public/@asia/@ro-bangkok/@ilo-islamabad/documents/publication/wcms_185255.pdf.Accessed 28 March 2023.
- (4) Zaheer, N., S. Arshad, and D. Kwak. 2022. “Managing Supply and Demand: The Key to Getting ‘Housing’ Right in Pakistan”. World Bank Blogs. https://blogs.worldbank.org/endpovertyinsouthasia/managing-supply-and-demand-key-getting-housing-right-pakistan.Accessed 28 March 2023.
- (5) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 28 March 2023.
- (6) NAPHDA (Naya Pakistan Housing Development and Authority). 2022. “Low Cost Housing Construction: Technologies, Techniques and Speedy.” https://naphda.gov.pk/construction-material.aspx#.Accessed 14 April 2023.
- (7) OHCHR (Office of the United Nations High Commissioner for Human Rights). 2014. “The Human Right to Adequate Housing.” https://www.ohchr.org/en/special-procedures/sr-housing/women-and-right-adequate-housing.Accessed 28 March 2023.
- (8) Reall. 2022. “Our History”. https://reall.net/about-reall/our-history/.Accessed 28 March 2023.
- (9) Businesswire. 2021. Pakistan Construction Market Trends and Opportunities Report 2021. https://www.businesswire.com/news/home/20210505005865/en/Pakistan-Construction-Market-Trends-and-Opportunities-Report-2021---ResearchAndMarkets.com.Accessed 28 March 2023.
- (10) NAPHA. 2021. “Financing Structure”. https://naphda.gov.pk/investmentOutlook.aspx.Accessed 28 March 2023.
- (11) SMEDA (Small and Medium Enterprises Development Authority). 2018. Pre-Feasibility Study: Housing Construction Company. https://smeda.org/phocadownload/Prefeasibility_Studies/Construction/Housing%20Construction%20Company%2037.20%20million%20Jun-2018.pdf.Accessed 14 April 2023.
- (12) PACRA (The Pakistan Credit Rating Agency Limited). 2022. Real Estate: Sector Study. Accessed 14 April 2023.
- (13) Press Information Department, Ministry of Information and Broadcasting. 2021. http://pid.gov.pk/site/press_detail/18784.Accessed 28 March 2023.
- (14) Finance Division, Government of Pakistan. 2022. “Real Estate Highlights.” Pakistan Economic Survey 2021-2022. https://naphda.gov.pk/naphda.gov.pk/docs/Economy%20Survey%20-%20Real%20Estate%20Highlights.pdf
- (15) Reall. 2022. “Our History”. https://reall.net/about-reall/our-history/.Accessed 28 March 2023.
- (16) Habitat for Humanity. 2021. “Housing and the Sustainable Development Goals.” https://www.habitat.org/sites/default/files/documents/Housing-and-Sustainable-Development-Goals.pdf.Accessed 28 March 2023.
- (17) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 28 March 2023.
- (18) UN Women. “Facts and Figures: Economic Empowerment.” https://www.unwomen.org/en/what-we-do/economic-empowerment/facts-and-figures.Accessed 28 March 2023.
- (19) Sustainable Development Solutions Network. 2022. “Performance of Pakistan.” Sustainable Development Report 2022. https://dashboards.sdgindex.org/profiles/pakistan.Accessed 28 March 2023.
- (20) Federal SDGs Support Unit. 2022. Pakistan's Voluntary National Review. https://www.sdgpakistan.pk/uploads/pub/VNR_2022_Pakistan_Report.pdfAccessed 27 March 2023.
- (21) Muslim Aid. 2021. “Pakistan Homeless Statistics”. https://www.muslimaid.org/media-centre/blog/pakistan-homeless-statistics/. Accessed 14 April 2023.
- (22) Naya Pakistan Housing & Development Authority (NAPHDA). 2020. NAPHDA Act 2020. https://naphda.gov.pk/naphdaAct.aspxAccessed 27 March 2023.
- (23) Government of the Punjab Services & General Administration Department. 2020. https://naphda.gov.pk/naphda.gov.pk/docs/notification.pdfAccessed 24 March 2023.
- (24) Sindh Building Control Authority. 2021. https://naphda.gov.pk/naphda.gov.pk/docs/Notification%20SOP%20OWC%20dated%2028.01.2021-F.pdfAccessed 24 March 2023.
- (25) Pakistan Engineering Council. 2021. Standardization of Building Codes. Standards and Specifications for Low-Cost (Affordable)Units. https://naphda.gov.pk/naphda.gov.pk/docs/Standardization%20of%20Building%20Codes.%20Standards%20and%20Specifications%20for%20Low-Cost%20(Affordable)%20Units%20-%2020May%2021.pdf Accessed 24 March 2023.
- (26) Naya Pakistan Housing and Development Authority (NAPHDA). 2021. Construction Sector Amnesty Ordinance. https://naphda.gov.pk/csao.aspxAccessed 14 April 2023.
- (27) BOI (Board of Investment). 2020. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1Accessed 27 March 2023.
- (28) Naya Pakistan Housing & Development Authority. 2022. Land Details. https://naphda.gov.pk/LandDetails.aspxAccessed 22 March 2023.
- (29) Naya Pakistan Housing & Development Authority. 2022. “Locations and Land Availability.” Land Details. https://naphda.gov.pk/LandDetails.aspxAccessed 22 March 2023.