No one expected Pakistan Prime Minister Imran Khan to ‘launch’ this Lucy in the Sky with Diamonds housing scheme. But he did.
Karachi stock market has been on a roller coaster. It crashes one day and recovers to an extent the next, lurching from negative sentiment to opportunity-buying the next day, but is essentially on a downward spiral.
One would not be off the mark in saying that investors are confused and frightened by the ineptness and cluelessness of the new PTI government. There are daily negative signals of confusion and a display of vindictiveness, instead of a focus on the future.
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The colossal stupidity was exhibited in just one interview that the government’s newly appointed spokesperson on economy, Dr Farrukh Saleem, gave on the housing project worth $180 billion, under which five million units will be built. The response was a study in ignorance, cronyism and impending disaster.
No one actually expected Prime Minister Imran Khan to ‘launch’ this Lucy in the Sky with Diamonds housing scheme. But he did. It’s not fleshed out, there is no clear financing plan for low-cost housing for the poor. But it’s billed as a project that will kickstart and form the backbone of Pakistan’s economic future, stimulating 35-40 ancillary industrial sectors and providing millions of jobs to the country’s youth.
His adviser on this scheme, Cheshire-based tycoon Aneel Mussarrat, has been reticent on the details but ordinary Pakistanis are asking some very basic questions about Khan’s grandiose vision.
The yearly cost of this project is $36 billion, almost the same as Pakistan’s annual tax revenue (approx. $36.8 billion at the current exchange rate). The scale is so huge that if you forget about hospitals, defence expenditure, schools, roads, metros, administrative government expenditure, you’d barely manage to build the ‘promised land’ of 2,739. 7 homes per day, and even then it cannot be done.
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But wait. Dr Farrukh Saleem tells us that the government does NOT plan to provide low-cost housing to the poor on its expense or to subsidise it in any way. The government will merely be a ‘facilitator’, the money will come from the private sector (mortgage lending by commercial banks), and the beneficiaries of the scheme will be those with an income of Pakistani rupees 100, 000 or less.
Imran Khan had said only the land will be provided by the government, but it isn’t clear if that will come at market price, or free of cost, or somewhere in between. No one knows what’s cooking or how big a scam this could turn out to be, given it’s his buddies who (the likes of Aneel Mussarat) have been entrusted with executing the scheme.
Imran Khan had claimed that while mortgage financed housing was high in the West, it stood at 0.25 per cent in Pakistan, and that the new scheme will attract foreign investment of at least $20 billion. Meanwhile, it’s not even clear whether the $180 billion total cost includes the cost of the land or not.
Meanwhile, housing wizard Mussarat said the scheme has houses under various brackets, costing $10,000, $20,000, $50,000, $75,000 and $100,000. There is no information on what discount rate will apply, the magnitude of monthly repayments, among other details.
With the current discount rate at 8.5 per cent, and that is expected to rise to at least 14 per cent by the middle of next year (to avoid negative real interest rates if IMF prediction of inflation rising to 14 per cent is taken as a base), which commercial banks will lend to those with incomes of say Rs 30,000 or even Rs 100, 000 for these homes?
Even if by some magic, banks were to start lending $180 billion to a single sector and crowd out all others, they don’t actually have that kind of money in their deposits. The current total gross national savings stand at $17.19 billion (5.5 per cent of $304.95 billion). These are the simple numbers this government hasn’t crunched.
A great critic of corrupt politicians and the in-house economic wizard of the PTI, Dr Farrukh Saleem has long been derided for coming up not only with cooked-up numbers, but also cooked-up economics. But the cringe-worthy moment came when he was massacred by TV show host Shahzeb Khanzada who asked him where the money will come from.
Was the scheme realistic, given the size of the project was nearly half of the economy itself?
“There is a dearth of 10 million houses, and if nothing is done, this number will double in the next five years. Five per cent live in pucca homes, 95 per cent in kaccha or are homeless. The average cost of a unit is Rs 15 lakh, to be financed with 90 per cent mortgage and 10 per cent equity. In developed countries, the housing sector leads the economy. Thirty five to forty ancillary industries like steel, cement, labour, fabric (for curtains) will take off,” he replied.
Khanzada reminded him of the size of the economy, and that the average cost of a house is actually Rs 50 lakh, not 15 lakh. And, that Pakistani banks have total deposits of Rs 13, 032 billion and 57 per cent of that is already loaned out in advances, and the rest in investments. So, where would he find Rs 24,000 billion? Instead of answering this very basic question, Farrukh Saleem began to waffle about the rich and the poor, the West and the politics of change. Then he said: “This has nothing to do with the size of the economy. World over, profitable business of mortgage lending happens”. To which Khanzada hilariously replied, “If there’s no linkage with the size of the economy, at least there is a linkage with the money in the economy, no?”
This was the gaslighting moment. The adviser suddenly started talking about corruption, citing a US State Department Study on International Narcotics Control, which states that $10 billion is laundered out of Pakistan every year. And multiplied by 10, that makes $100 billion, which can be brought back, and the current and future savings of $10 billion a year could be made and “extra capital created”.
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It is an entirely different matter that the report mentions no such thing, but the PTI government never allows facts to interfere with its plans.
The adviser also added another $30 billion of corruption in government contracts that the PTI could stop, and create “extra capital” for the housing project. Gone was all talk of bank deposits, national savings, tax revenues. But the savage Khanzada politely reminded him that the $30 billion saving from ending corruption would be government money. And the government doesn’t plan to fund the project, right? He ended with: “Ye hai hukoomat ki tayyari?”
The future of Pakistan under this Government-by-Claims doesn’t look pretty.
The author is a columnist and human rights defender based in Lahore.
Highly incompetents have taken over the govt. Tall promises without any home work.
This woman is not a writer or a journalist of any distinction in Pakistan she is a blatant hater of IK and PTI as anything she ever writes clearly shows. For this reason alone one cannot believe anything she says as she has no credibility. The fact IK’s bitter ex-wife Reham re-tweets every malicious word she writes is the final nail in the coffin of her having any integrity. Awful woman pretending to be a journalist.
Viewed objectively, how realistic is our own Houses for all by 2022 scheme ?
When any politician makes a ‘promise’, he knows that 1. He will NOT necessarily have to keep it and, 2. He knows that public memory is notoriously SHORT.