Private Sector Initiatives For Low Income HousingPresented by Jawad Aslam, AMC’s Chief Executive Officer, on May 29, 2015

Changing the face of affordable housing through private sector intervention

2

• Feed his family• Get children employed

• 40 Year old male, married with 5 children• Primary School dropout• Earns PKR 12k-17k per month as a laborer

His Plans

• Build a house• Start his own business

His Dreams

• Proper Health• Education for children • Clean water / Sanitation

His Needs

The Problem: Typical citizen of Pakistan

• Getting his children married• Avoiding medical emergencies

His Challenges

How traditional development models have failed the affordable housing sector

4

Haphazard site selection, poor design, speculation and lack of management leads to:• Ghost Towns: low occupancy communities• Ghettos: a nesting-ground for vices such as theft, drugs, prostitution and gangs

A fresh solution is desperately needed to create empowered communities which have:• Occupancy leading to communal ownership• Conflict resolution mechanisms• Long-term sustainability

A Fresh Approach to Affordable Housing Solutions

• Develop roughly 2/3 of the saleable area into homes sold at cost

• Ensure occupancy to prevent ghost towns from emerging

• Remain involved in the project for 5 years to prevent formation of slums

3

Sell remaining land at market rate to recover cost of the whole project, ensuring financial viability.

4

Acquire peri-urban private / government land at a low cost

1

Set aside non-saleable portion of the land to create: • Civil infrastructure such as

sewage and water towers; and• Social infrastructure such as

schools, parks and medical facilities.

2

Master Layout Plan

6

7

Home Layout: One Bedroom

Plot Size – 42’x22’227sft covered

Room1 11x10 (116sft)1 Bath 7x4 (28sft)

1 Kitchen 7x6.5 (48sft)Veranda 10x7 (70sft)

8

Home Layout: Two Bedrooms

Plot Size – 42’x22’350sft covered

Room1 11x10 (116sft)Room2 12x10 (123sft)

1 Bath 7x4 (28sft)

1 Kitchen 7x6.5 (48sft)Veranda 10x7 (70sft)

9

Home Layout: Three Bedrooms

Plot Size – 42’x22’473sft covered

Room1 11x10 (116sft)Room2 12x10 (123sft)Room3 12x10 (123sft)

1 Bath 7x4 (28sft)1 Kitchen 7x6.5 (48sft)Veranda 10x7 (70sft)

Assumptions:• Price is all-inclusive of land, infrastructure, construction, operational and contingency costs• 25 acre parcel, land at PKR 5m per acre and civil infrastructure at 4.8m per acre (water, sewer, roads, power)• 54% saleable area for residents and no land filling needed• Mortgage provided at 70% loan to value, and subsidized interest rate of KIBOR + 1% (as at 21 May 2015, 3 year KIBOR at 7.66%)• Introductory prices as of today only. Subject to inflationary changes over time.• Plot size is 924 sq ft (22’ by 42’)

One Room Two Room Three Room

Plot Size marla marla marla3.40 3.40 3.40

Covered Area 227 sft 350 sft 473 sft*

Price PKR 9.2 lakh PKR 11.0 lakh PKR 12.8 lakh

Deposit 30% 30% 30%

Deposit Amount PKR 2.8 lakh PKR 3.3 lakh PKR 3.8 lakh

Term 10 years 10 years 10 years

Monthly Rental PKR 8,000 PKR 9,600 PKR 11,100

Minimum Monthly Salary

PKR 26,000 PKR 30,000 PKR 33,000

Layout 1 Room, 1 Kitchen, 1 Bath, Veranda, Boundary wall

2 Rooms, 1 Kitchen, 2 Bath, Veranda, Boundary wall

2 Rooms, 1 Drawing room, 1 Kitchen, 2 Bath, Veranda, Boundary wall

Pricing & Mortgage

10

Clients

Developer/ Investor

Banks/ Financial

Institutions

Local Government

Provincial Government

Federal Government

NGOs

• Reduced cost• Interest subsidy• Options for mortgage• Modern construction with all social infrastructure in place• Organized and vibrant communities

• Provide initial land parcel investment• Provide working capital• Build homes at introductory average price of PKR 10 lacs as well as civil infrastructure• Contribute towards construction of social infrastructure• Manage sales and marketing• Donate at least 1% of land to the community for long term sustainability• Manage the communities for a period of 5 years• Bring in NGO partners to manage social infrastructure

• Provide mortgages • Streamline approval processes• Offer optimal terms:

• DBRs• Debt-to-equity ratios• Tenures• Penalties

• Provide external infrastructure• Waive tax liability• Facilitate regulatory approvals• Waive processing fees

• Facilitate regulatory approvals• Revise by-laws

• Double FAR in the for-profit 40% area of development• Relax land use restrictions

• Waive tax liability where applicable• Land: existing lands or assistance in acquisition• Facilitation of transport where applicable

• Develop a framework to incentivize private investment• Act as a facilitator, not an implementer

• Provide interest rate subsidies to clients• Provide lands where possible• Waive tax liabilities where applicable • Protect foreign investment

• Manage all social infrastructure (schools, clinics, VTI etc)• Manage community and organize formation of Community Development Organizations• Manage shared infrastructure and facilities (parks, security, sewerage etc)

An entire ecosystem is required to support this new way of developing affordable housing

11

Thank you

Vibrant well managed affordable housing communities are possible when market participants work together