Housing finance in developing countries : a case study of Lahore, Pakistan

• Main Author: Malik, Tariq Habib
• Published: Birmingham City University 1994
• Subjects: 363.5; Housing provision & property
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.240747

This thesis deals with the systems of housing and housing finance around the world with special reference to Lahore, Pakistan. Formal systems are predominantly functioning in the developed countries and informal systems are prevalent in the developing countries. The formal systems are very well established in the developed countries, but help only a fraction of the people in the developing countries. Informal systems of housing finance (such as personal savings, help from the family and friends, rotary credit system and borrowing from private money lenders) are the main source of financing a home in the developing countries and playa minor role in the developed countries. Four case studies of India, Kenya, Turkey and Brazil demonstrate that the formal systems are developing in these countries. Governments in the developing countries are trying to cope with the shortage of housing without viable housing finance systems. This thesis includes an investigation of the housing finance system in Pakistan and the field work looks at how the inhabitants of middleclass areas in Lahore finance the construction, purchase and improvements made to their homes. Households have used both formal and informal methods of saving such as personal savings, money from relatives and friends, HBFC, Commercial Banks, Rotary Credit System, remittances from abroad, also by selling jewellery and other assets, loans from their employers and from private money lenders. The access to the fonnal housing finance system is very difficult and time consuming and the people who borrowed money from this system contribute only a little as compared to the total price of the house. A contributory factor is also the breaking up of the joint family system increasing the demand for housing. The study of nine different middle-class localities in Lahore shows that the existing fonnal housing finance system does not reach the middle classes. The study also establishes that people have enough savings to put towards the deposit for the house and their incomes can support the monthly instalments if a housing loan is available to them. There is need of a viable housing finance system with which savings can be mobilised and then utilised for loans to house purchasers. If the government wishes to ease the housing shortage they should alter the system of land transfer (land registrations) by reducing the taxes which would encourage the market.