Development of Strategic Goals for Housing Finance in Pakistan

Housing  finance is a crucial component of economic development, particularly in rapidly urbanizing countries like Pakistan. According to UN-Habitat, half of humanity now lives in cities, and this urban population is projected to increase to 60% within the next two decades. In the developing world, urban areas are absorbing about 5 million new residents every month, accounting for 95% of the world’s urban population growth. Pakistan is no exception to this trend, and the need for strategic goals in housing  finance is more pressing than ever. This write-up will explore the development of strategic goals for housing  finance in Pakistan, the factors driving urban growth, and the role of finance in addressing the housing needs of the growing urban population.

Housing plays a key socio-economic role in Pakistan, representing the main wealth of the poor in most developing countries. As urbanization accelerates, the demand for housing and basic urban infrastructure is expected to soar. The UN estimates that by 2030, an additional 3 billion people will need new housing and basic urban infrastructure. Without proper finance solutions, many urban poor will struggle to afford formal housing. This puts finance at the forefront of the global development agenda, and Pakistan must develop resilient and affordable housing markets to meet the needs of its growing urban population.

Urban growth in Pakistan is driven by a combination of factors, including geographical location, natural population growth, rural-to-urban migration, infrastructure development, national policies, corporate strategies, and other major political, social, and economic forces.

Urban areas in Pakistan experience population growth through natural increases when birth rates exceed death rates. This is often a result of improved healthcare, better sanitation, and enhanced living conditions in cities.

Internal migration from rural to urban areas is another significant factor contributing to urban growth. People migrate to cities in search of better economic opportunities, higher wages, greater access to education, and improved healthcare.

The development of infrastructure in urban areas also attracts people from rural regions. Better transportation, communication, and public services make cities more attractive places to live and work.

To address the housing needs of the growing urban population, Pakistan must develop strategic goals for finance. These goals should focus on creating resilient and affordable finance markets, improving access to long-term finance, expanding access to lower-income and informal markets, addressing obstacles to affordable housing, and incorporating climate change considerations into housing policies.

Pakistan needs to conduct diagnostic analysis, advise on legal and regulatory frameworks, and support institution building to create a sustainable and efficient housing  finance system. This includes implementing fintech innovations in housing product development, delivery, and legal and regulatory frameworks.

Improving access to long-term finance is essential for sustainable housing development. Pakistan can achieve this by developing capital markets instruments such as liquidity facilities and covered mortgage bonds. Enhancing systems to incentivize longer-term savings and diversifying long-term funding options, including through local currency bond markets, will also be crucial.

Expanding access to housing finance for lower-income and informal workers is vital for inclusive urban development. Pakistan can achieve this through credit markets, housing microfinance, rental housing, residential leasing, contractual savings, effective targeted subsidies, and guarantee schemes.

Affordability is a key challenge in housing finance. Pakistan needs to address supply-side issues such as titling, land use, land infrastructure, construction finance, and housing policies. Introducing new, cheaper technologies and supporting energy-efficient buildings can also help reduce the costs of formal housing.

The housing sector contributes significantly to global greenhouse gas emissions. Pakistan must incorporate climate change considerations into its housing finance policies, providing support for sustainable financial solutions for affordable and impactful “green” housing refurbishment and construction.

The development of strategic goals for housing finance in Pakistan is essential to address the housing needs of its growing urban population. By focusing on creating resilient and affordable housing finance markets, improving access to long-term finance, expanding access to lower-income and informal markets, addressing obstacles to affordable housing, and incorporating climate change considerations, Pakistan can ensure that its urban residents have access to safe, affordable, and sustainable housing. The role of housing finance in urban development cannot be overstated, and Pakistan must take proactive steps to develop and implement effective housing finance strategies.