Housing Finance in Afghanistan: Challenges and Opportunities
Executive summary of the document:
During the conflict of the past two and a half decades, the social and economic infrastructure of Afghanistan was virtually destroyed. About six million Afghans left the country, mainly for Pakistan and the Islamic Republic of Iran. Many of those who returned found their houses destroyed and their land under new ownership, having illegally changed hands many times. Most cities in Afghanistan now face acute housing shortages, with returnees living in inhuman conditions. In the informal settlements of Kabul two-thirds of houses are occupied by more than one family, and almost 9 of 10 families live in just one or two rooms.
To alleviate the severe housing shortage will require concerted actions by the government, the private sector, donors, and stakeholders. The World Bank estimates that in Kabul alone investment of $2.44 billion will be needed for rehabilitation and new construction. Efforts to develop the housing sector need to focus on several challenges: resolving legal issues relating to land ownership, tenure, and transfer; creating a legal framework and necessary infrastructure for the housing market; broadening access to finance and developing the mortgage market; and extending microfinance loans to cover housing for low-income groups.
This study examines the constraints on the housing sector in Afghanistan. It evaluates government policy on housing, looks at the state of housing finance, and examines legal and regulatory barriers with a bearing on the housing market. The report provides policy recommendations aimed at helping to develop a private-sector-led housing market. To assist in formulating policies and implementing actions, the study recommends forming a housing finance task force under the sponsorship of the government. Such a task force could help foster wider discussion among the government, financial institutions, microfinance institutions, nongovernmental organizations, civil society, and other stakeholders.
ECONOMIC AND FINANCIAL SECTOR OVERVIEW
The Afghan economy has sustained strong GDP growth in the past few years, with per capita income rising from $123 in 2001/02 to $300 in 2005/06.1 Projected GDP growth for the medium term is 10–12 percent a year, which would lead to a steady rise in per capita income to about $482 in 2010. The country’s population, about 24 million today, is projected to reach about 37 million by 2015. That will compound the housing problem in Afghanistan, especially in such cities as Kabul, Jalalabad, Maser-e Sharif, and Kandahar. But higher incomes may provide opportunities for a growing housing market as long as the right kinds of policies and interventions are put into place.
Among the biggest constraints is the very limited outreach of financial services in Afghanistan. Small and medium-size businesses and the housing sector have almost no access to bank credit and only limited access to banking services. The World Bank, in Doing Business 2008, ranked Afghanistan 159th among 178 economies on the ease of getting credit, a measure that reflects the quality and coverage of the credit information system and the legal rights of borrowers and lenders.
Further reading:
[PDF] Housing Finance in Afghanistan: Challenges and Opportunities openknowledge.worldbank
Housing one of biggest challenges in Afghanistan as thousands of … infomigrants