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A place all their own

Lebanon’s landmark housing scheme is working, but difficult obstacles lie ahead

by Thomas Schellen

So that every family may own a home. This, according to the chair-director general of Lebanon’s Public Corporation for Housing (PCH), Rony Lahoud, is the overarching idea under which the understaffed government agency pursues its mission of examining an endless stream of loan applications from Lebanese citizens. “It is hard work, but it’s amazing at the same time because when we are giving a loan to the citizen, we are telling him, ‘yeah you are going to have your own apartment where you can build your family,’” he says.

Lahoud’s career stops included work in banking and banking related IT companies outside of Lebanon before he joined PCH as ranking public servant and was confirmed as the agency’s chair and director general (CDG) on May 9, 2014, as part of a wave of high level administrative appointments that constituted one of the last governmental decisions before the end of President Michel Sleiman’s term.

According to Lahoud the PCH approves about 6,000 loan applications per year and has had close to 67,000 loans in its records since it started operations in September 1999. Housing loans with PCH support account for half the real estate market — numerically but not in value. “The value of these loans is about LBP 7.300 trillion [$4.842 billion], and that is cumulative; we are talking here [of] all the years since September 14, 1999, which was when the first loan was given.”

While Executive reporters wait for Lahoud to arrive at his office, some of these loan applications are being delivered; an employee pushes in a classic wire mesh supermarket shopping cart that is not loaded with groceries but stacked high with paper folders, each of them bulging with application documents. Signing these endless files is one of the arduous daily duties of his role, Lahoud confirms during the interview, but according to him the agency is on the brink of enhancing its processes through computerization and automation.

Making work flow with limited means and archaic methods is a common sight today around ministries and administrative units in the Lebanese public sector. Fundamentally to blame for this is always the nation’s chronic lack of fiscal breath that transpires into financial and operational asthma of government departments. Plus, as far as operational cash flows, the periodic occurrence of political disagreements among government players poses a constant risk of disruptions.

Short term funding deficiencies were also what brought the PCH into the headlines last year when commercial banks became wary of outstanding payments under the agency’s responsibility, reported, to the tune of $60 million. “The biggest problem was the cash that the PCH needs each month to transfer to the banks for paying interest of the loans given to the citizens where we are paying about LBP 17 billion [$11.3 million] per month,” Lahoud explains.

The transfers are essential under the complex mechanism by which the PCH and commercial banks collaborate in granting housing loans whose beneficiaries enjoy credit terms that are much more affordable than in standard housing loans. For this mission of sponsoring housing finance for Lebanese citizens in the reasonably priced range of the market, the PCH is entitled to draw on certain property related government revenues, such as a portion of construction and building permit fees.

On the cusp of automation

The money tap was turned back on through discussions with the two involved ministries, finance and social affairs, and with the prime minister and the speaker of the house, Lahoud adds. In securing these funds at the end of last year it was ascertained that the PCH could continue to approve new housing loans in 2015, but that appears to be far from the last of its challenges.

A core structural need is already lined up. The PCH needs to expand and renew its human resources, Lahoud says, because it has a current headcount of about 100 employees, many of whom are approaching mandatory retirement age. To be fully staffed for its operations in the Beirut head office and four satellite offices, and for collaborating with banks — currently 29 collaborations are in place — the agency needs “about 180 employees,” he says.

In moving into the information age, Lahoud says PCH will soon bring technical measures to bear, “like implementing an internal automation system for our work, and everything will be soon computerized starting with the launch of our website in the near future.”

He adds that the PCH needs to revise its organization charts and add new key positions, such as an IT manager. Beyond being a task for management and internal organizational development, however, this challenge also seems to entail external and political components as decrees and approvals are required.

For about half of its existence to date — from 2007 until 2014 — the PCH was also operating without a CDG after its founding CDG Antoine Chamoun retired from the position. The organization thus was not able to expand its reach as much as might have been needed and despite the program’s importance for young families and mid income earners, this clientele’s awareness and understanding of what the PCH was offering was often lacking.

Some informal intermediaries and unlicensed property agents, which are still a major force in the Lebanese real estate market, deceived people about the PCH loans and there is a general deficiency in awareness among potential loan clients, Lahoud concedes. “This is why we are now placing great emphasis on awareness and communicating. We are going to use all kinds of communication tools — our website, emails, our Facebook page and even SMS, [as well as] do a lot of different stuff like presentations on television and radio programs just to alert everybody that we are here, and here to hear you and to help you.”

In practical terms, the awarding of a PCH loan currently consumes on average about 10 weeks, with processes requiring loan applications to be examined by both the issuing banks and the PCH in steps that involve moving the files several times between the participating bank and the agency before the six member PCH Board signs off on a loan. According to Lahoud it is currently three banks that account for almost half of the lending activity with PCH sponsorship, namely Credit Libanais, BLOM and Byblos.

Beyond loans

The task of providing Lebanese citizens with affordable homes is ever more ambitious as no one has a clear understanding of the actual structure and state of the national housing situation, as far as home ownership rates and ratios of owned to rented residences or rent price levels across municipalities are concerned.

Nonetheless, and notwithstanding large political requirements — which usually constitute obstacles — of new legislation, the PCH envisions its future role expanding into the development of individual housing supply in rural areas of Lebanon, in collaboration with municipalities. After securing its finances and developing its human and technical capabilities, this will be the third part of the PCH growth strategy, Lahoud says. “It will be about new projects where we are going to start building some apartments under a low cost frame for the [eligible] people in the village.” This, he adds, will also be done with a view to relieve pressure on Beirut as a population center, by enabling people to reside in rural areas with improved housing and living conditions.

Legal requirements for such measures, however, will entail the passing of new laws such as one facilitating rent-to-own options in the national real estate environment. The PCH sees its role in the provision of homes as serving 50 percent of the total real estate market in the future — which Lahoud estimates as constituting a need for 8,000 to 9,000 new units per year. But as far as getting to the state where socioeconomically winning projects can be implemented in collaboration with municipalities, or under advanced rent and housing legislation, he is not committing to a time estimate. He says, “It is not [going to come] quickly. We need to change some specifications and features in the laws, which we have started to work on. Maybe this will take some time, but at least we started thinking.”

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Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years. Send mail

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