Is Public Private Partnership under Naya Pakistan Housing Program old wine in a new bottle?
Development under taken by FGEHF under NPHP may not lead to significant increase in housing supply.
I have already covered the shortcomings of Phase I of Naya Pakistan Housing Program (NPHP) launched and to be developed by the government in the below blogpost.
Another aspect of NPHP is public private partnerships (PPPs) where government will invite private sector to participate in building the project. In certain media appearances, Federal Government Employees Housing Foundation’s (FGEHF) request for Joint Ventures (JV) with private sector is being touted as launch of PPP under NPHP. This short (hopefully) blogpost reviews the program.
EOI and MOU for the Joint Venture
FGEHF issued an Expression of Interest (EOI) for Joint Ventures under NPHP on October 12, 2018 requesting private sector developers to come forward with a piece of land to develop affordable housing options for Federal Government Employees all over Pakistan.
The EOI advertisement gave 30 days for submission of proposals, which brings the final submission date to November 12, 2018. As has been the case so far with NPHP, date for submission was extended. I am not sure how many extensions were announced but after 120 days of the first ad, another extension of 15 days was announced.
A memorandum of understanding (MOU) has also been made available on FGEHF site which will be signed with the prospective JV partner. You can read the MOU here at your leisure but brief outline:
- FGEHF (party A) and winning bidder (party B) to form a JV
- Bidder (party B in MOU) to provide clear land to FGEHF (party A) for constructing houses.
- Each party to make payment of its share of land at inception of the JV (75% FGEHF, 25% party B).
- 75% developed units will be for federal employees and 25% for general public.
- Infrastructure work on land to be carried out by party B though FGEHF will facilitate the approvals from various authorities. (For those who have been keeping track, most NPHP announcements have said that government will provide infrastructure ready land and private sector will develop the housing units. Here, private sector is responsible for developing infrastructure).
- The number and sizes of various units isn’t decided in advance but will be negotiated at the MOU signing stage.
Minor quibbles
1. EOI is issued under “JV policy for land banking with private sector”. This isn’t land banking. In land banking, parcels of land are assembled and run through rezoning/permitting/infrastructure to make them ready for development.
2. Reading the EOI, you would think FGEHF is asking owners of large tracts of land to sell it to FGEHF. However, MOU makes it clear that FGEHF wants builders to buy land/have an option on the land and bring it to FGEHF for the latter to buy in a JV.
3. EOI/MOU is under Naya Pakistan Housing program but no mention anywhere of maximum price of housing units. If there is an upper limit of housing unit, it should be explicitly mentioned so that time and resources are not wasted in analyzing proposals that will eventually not meet it. Tabadlab has shown in its First Response that the pricing of the NPHP projects launch to date are not in line with NPHP parameters as shown below:
RFP for Consultant
Soon after the EOI for JV was advertised, FGEHF also issued an advertisement for appointment of a consultant to assist FGEHF in evaluating the bids received for JV. You can read the detailed RFP here but the salient requirements are those given between a) and f) in below advertisement.
As per the news item, NESPAK has won the bid to be the consultant for FGEHF.
Progress to date
FGEHF announces on their website (FGEHF is playing with its website so there is a possibility that this link will be broken) 88 bids received with none of the bids having the required information.
If you look at the JV EOI, FGEHF didn’t ask for much and yet, the bidders didn’t even provide that. Rather than scrapping the process and restarting it, FGEHF transfers the burden to NESPAK to evaluate those bids. Now NESPAK is going to expend significant resources both in terms of money and time to evaluate 88 bids__ money that will come out of national exchequer unless bidders have agreed to foot the evaluation bill. (In a saner world, the government provides a list of reputable third parties. Bidders who submit their bids also submit a report from these third parties paid from their own pocket verifying that the land has the required characteristics as sought by the government).
If you notice the first line in the announcement above, the EOI JV process was launched on June 28, 2018 before NPHP came into being. You can see here EOI and MOU (June 2018 versions) that are almost the same as EOI and MOU issued under NPHP. The only major difference is, well, let’s play spot the difference
FGEHF is doing what it has been doing for years. However, now it does it “in order to realize the vision of Prime Minister of Pakistan”. You don’t believe me? Below is the excerpt from the November 2015 advertisement when EOIs were requested under Prime Minister’s Housing Program. You can read the EOI and MOU here in a single document.
Reporting to PM (my guess)
Prime Minister Imran Khan is very keen on getting NPHP off the ground to provide shelter to the masses and I believe he will be getting the following updates from his minions:
Work moving ahead at full speed.
Advertisement placed in newspaper.
Overwhelming response of 88 bids received.
Consultant appointed.
Consultant tasked with reviewing the bids.
Previous PPP of FGEHF
Housing is a challenging problem and hard to get it right first time. But FGEHF is not doing this for the first time. They shouldn’t be proceeding in this manner above.
Earlier in 2011, FGEHF launched Lifestyle Residency Apartments in Islamabad sector G-13 under a similar initiative. You can visit their website here.
The below table provides the prices of the various units in the scheme.
As you can see, except for Type E apartments, all apartments are priced higher than Rs. 3M (the cutoff price for mortgage financing under NPHP/SBP policy). Only 13% of the units are of Type E.
The aforementioned prices are 2011 prices. Prices in 2019 are expected to be significantly higher. Hence, the projects launched by FGEHF under NPHP (if similar in location/size/quality to existing projects) will not qualify for mortgage financing under existing NPHP/SBP policy.
Conclusion
- FGEHF has been doing PPP projects for years.
- The price of units in new FGEHF PPP projects most likely will not meet the criteria for mortgage financing under NPHP/SBP policy.
- PPPs by FGEHF under NPHP will not significantly increase the housing supply as the new regular units built by FGEHF will now be classified as built under NPHP .
Now you can yourself answer the question posed as the clickbait title of this post.
