Pakistan has a housing backlog of almost 10 million units
Although the incumbent Pakistani Premier Imran Khan has pledged Wednesday to construct five million houses for his shelter less compatriots during his government’s stipulated five-year tenure, the challenge is certainly a daunting one as the country has a housing backlog of almost 10 million units with demand growing at a rate of 0.7 million new units per year.
In its November 27, 2017 report, “Lamudi,” a Berlin-based online real estate marketplace with operations in 34 countries, had viewed: “By 2016, Pakistan’s housing shortage had reached around 10 million units and is expected to grow every year by 0.7 million units. This is an alarming situation and needs to be dealt with immediately. Most of this shortage is due to lack of housing available for the lower income strata and an underdeveloped mortgage finance market.”
“Lamudi” had added: “World Bank has been developing a house financing plan for Pakistan to help deal with the housing shortage crisis. WB along with PMRC (Pakistan Mortgage Refinancing Company) are going to help in development of the mortgage sector, focusing mainly on the lower income brackets. The World Bank will be providing funds to banks through PMRC to increase the lending volume, specifically to lower income group. The target is to help expand the housing finance sector in such a way that it is profitable for the banks but also easily accessible than conventional loans. On-lending support is another way the World Bank plans to help banks increase their lending power; banks will be able to lend the money they have borrowed from other organizations/people.”
Housing situation in neighbouring India:
Imran Khan’s Indian counterpart, Narendra Modi, had announced his ambitious plan to construct 20 million homes across the country in June 2015.
According to the “Business Insider,” Premier Modi’s plan had the potential to set the stage for investment worth $1.3 trillion in the Indian housing sector
In its May 11, 2017 edition, an Iranian English language newspaper “The Financial Tribune,” had noted: “The investment banking firm expects that between 2018 and 2024, India would be building 60 million new homes, while also creating about two million jobs annually. These changes would increase the country’s GDP by as much as 75 basis points. Prior to government’s demonetization move, India’s affordable housing was growing the fastest, but experienced a slump after almost 86% of the nation’s currency was banned on November 9, 2016. However, the industry has started showing signs of recovery. Modi government has already granted affordable-housing builders an “infrastructure status”, thus making them eligible for state incentives, subsidies, tax benefits and institutional funding.”
A unique aspect of Pakistan’s real estate market is that the industry hits record highs and lows within a span of a few years. Elsewhere in the world (barring the 2005 sub-prime mortgage crisis), the real estate industry more or less follows a steady growth rate (five to eight percent per annum is the average). In Pakistan, however, when bullish trends are witnessed in the market, monthly growth rates of more than 10% are recorded, which are unprecedented. This was the case post 9/11, when FDI by expatriates increased, and again, between 2011 until the announcement of the Federal Budget 2016-17.
According to the “India Brand Equity Foundation,” a trust established by the Department of Commerce, Indian Ministry of Commerce and Industry, the real estate sector in India is expected to reach a market size of US $1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13 per cent of the country’s GDP by 2025. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India’s growing needs.
The Securities and Exchange Board of India has given its approval for the Real Estate Investment Trust platform, which will help in allowing all kinds of investors to invest in the Indian real estate market. It would create an opportunity worth Rs 1.25 trillion (US$ 19.65 billion) in the Indian market over the years.
The “India Brand Equity Foundation” adds: “It is expected that by 2025, India will be adding 11.5 million new homes each year. Thus, making the construction market in India $1 trillion a year market. It is estimated that by 2025, India, the USA, and China will contribute 60% of all the global growth in the construction sector.”
The “Reuters” has maintained: “As the infrastructure is developing at a fast pace, the demands for construction equipment (including home construction materials) is expected to jump further. The sale of construction equipment is estimated to rise to 96,700 units in 2018 from 50,000 in 2007. In 2015, the sales of construction equipment reached 68,200 units.”
In India, the total construction spending was measured $427 billion in 2013, which was the third-highest in Asia.
International construction industry:
By 2030, research shows the construction industry will account for 14.7 per cent.of all global economic output.
Housing situation in London:
London’s USD $20 billion “Crossrail Development” is the largest project in Europe and the country is set to expand Heathrow Airport, construct a high speed railway, redevelop large portions of cities and build a nuclear power station. House building is set to be significant with plans to build 3.3 million homes or 31,000 homes every day over the next 14 years.Between now and 2030, the UK will spend a total of USD $6 trillion on construction works.
In its August 15, 2018 edition, the “Guardian” had reported: “UK house price growth slowed in June to the lowest annual rate in five years, driven by falling prices in London, according to official figures. Average house prices across the country increased 3% in the year to June, down from a 3.5% gain in May, the lowest annual rate since August 2013, the Office for National Statistics (ONS) said. The average price of a UK home was £228,000 - about £6,000 higher than in June 2017 and £1,000 higher than in May.”
The newspaper had held: “The annual UK growth rate has slowed steadily since summer 2016 and has remained below 5% throughout 2017 and 2018, with the exception of October 2017.The second-lowest annual growth was in the north-east, where prices dropped 0.6% in the year to June. Prices are still growing strongly in other areas of the country, led by the West Midlands where prices rose by 5.8%, and the east Midlands with 4.1% annual growth. Semi-detached houses showed the biggest increase, with prices up 4.4% to £216,000 in the year to June. The average price of flats rose by 0.5% to £204,000, marking the lowest annual growth of all property types.”
Housing situation in Indonesia:
With USD $68 billion being poured into major infrastructure projects by 2019 alone, Indonesia is one of the fastest growing construction markets in Asia.
The Government announced a ‘tax amnesty’ in mid-2016 with an aim to see some US $304 billion flow back into the country, boosting construction spending.
In November 2017, the World Bank had asserted: “Providing affordable and adequate housing has become a top priority for the Indonesian government with the launch of “One Million Homes” Programme. Previous efforts to address the demand for affordable housing - a function of both new annual demand creation and an unmet housing deficit - had not effectively improved housing outcomes at the scale necessary. Many families live in sub-standard housing but have no means to upgrade their homes. The National Affordable Housing Project (NAHP) will be co-funding a government program for home improvement and re-construction to address the qualitative housing deficit of 3.4 million. More than 125,000 households are expected to be eligible for the grants, which start at the equivalent of a thousand dollars, depending on the level of degradation.”
Housing situation in United States:
The United States of America is expected to spend a mind-bending US $30 trillion on construction work over the next 14 years.
The US construction industry took a significant hit in the last recession - particularly in the house building sector - and is only now beginning to bounce back. With housing growth expected to return to its pre-crash levels and major investment planned in the country’s infrastructure over the next decade, particularly in the greater New York City area where much of it is over 100 years old.
In its May 21, 2018 edition, the “Bloomberg” had stated: “Fear of missing out may persuade Americans with an eye on buying a home to hurry their decision before it gets more expensive. But while demand shows few signs of teetering, jumps in both property values and borrowing costs will test the market’s durability.”
In its January 3, 2018 edition, the “Forbes” had opined: “After a decade of decline the homeownership rate finally ticked up in 2017. By the third quarter, 63.9% of households were occupied by owners—up from a low of 62.9% in the second quarter of 2016.”
Housing situation in China:
China’s vast construction industry is growing at an insatiable rate and will add US $2.1 trillion to global construction output by 2030.
The country is currently faced with an ageing population, which could see a rise in the construction of healthcare facilities or greater infrastructure capacity.
The government’s “One Belt, One Road” economic policy is driving co-operation and trade with its immediate neighbours in Asia and is driving massive investment in infrastructure. The programme could spawn the ‘single largest construction project in human history’ in the next few years.
On January 22, 2018, the “New York Times” had stated that China was trying to halt purchases of homes by people who already own one.
“It (China) has plowed billions of dollars into building new homes that regular Chinese people can afford,” the American newspaper had written early this year.
On May 7, 2018, the “Forbes” magazine had viewed: “In China, the forces driving residential property demand have not changed in the past 20 years despite a series of government interventions. Against a tide of urbanization, rising middle-class income and the anomaly of a one-child policy, the trajectory of the housing market in key cities like Beijing, Shanghai and Shenzhen. High economic growth across diverse sectors created employment opportunities attracting talent from across the country. The fundamentals of rising population, income and employment sustained over two decades created real demand that powered housing prices to grow more than 600 per cent in these cities.”
The United States, China and India will together account for 57 per cent of all global growth in the construction and engineering markets by 2030, amounting to US 6 trillion at least.
These three nations account for over a third of the world’s population and economic output also.
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