The initial target was to structure the program so that home buyers only have to give as much as Rs20,000 as monthly installment. Mind you, at the current prevailing rates of property prices, there is no way any low-income household can afford buying property under this plan (read more: “Roti, kapra, (and then maybe) makaan”, July 4, 2019), let alone give Rs20,000 as monthly installment. Let’s agree then that the program is not for low-income households at all. In fact, based on income quintiles of the Pakistan Bureau of Statistics (PBS), anybody earning less than Rs40,000 cannot afford buying a property costing Rs1 million, given the existing mortgage facility offered by House Building Finance Corporation (HBFC). This product comes at a fixed rate of 12 percent interest across a tenure of 20 years. Affordable? As we have calculated earlier, barely.

Consequently, funds to the tune of Rs30 billion have now been put aside by way of subsidy for NPHP. Will this help? Unsurprisingly, it won’t. In fact, this subsidy barely even covers the inflationary effects that have taken place over the past year. A simple calculation based on Naya Pakistan Housing Authority (NPHA) calculations put the total cost of 5 million houses to Rs4.5 trillion—across five years. Since Aug-18, Consumer Price Index (CPI) inflation has grown 12 percent while price index for construction items has grown by 14 percent. The total cost therefore has grown by Rs630 billion based on the change in per unit cost. In the same time, property prices have also grown.

In a scenario where property prices subject to speculation are rising every day and inflationary pressures persist, subsidies will not even cover the incremental cost of construction. There is also no information as to what kind of subsidy it is—is it cash offered to consumers at hand, or is it offered to bank to reduce interest rates and subsequently, monthly installments. The more question however is this: how does the government create commercial viability for builders whilst making these homes affordable for new home buyers all the while running on a deficit budget?

One school of thought is to just increase supply and not think too much about affordability. When supply in housing is substantially increased, prices would automatically rationalize. Right now, the demand is so high and the supply so low, that the ball is entirely in the court of developers. However, at current rates, supply can only be raised for a certain share of population since most cannot afford these properties (60% of population based on PBS income quintiles cannot afford housing right now). If builders just churn out properties and are unable to sell them at asking prices, these projects could easily turn into ghettos. The only solution for them would be to thin out their margins—given costs of construction are rising and selling prices have to be reduced.

Another thing that is certain is that there will be no demand without economic growth. If disposable incomes don’t start rising soon, even those households that could afford the monthly installment last year, would be pushed out of the market. It seems a lot of different pieces need to fit together to make the NPHP work in its current form. But will it be housing the poor? Not just yet.