KARACHI: Amid surging inflation, high interest rates, and mounting taxes on property transactions, Pakistan’s housing sector is facing a sharp slowdown, with sales and bookings grinding to a near halt.
Experts said that without immediate intervention, particularly a government-backed, subsidized house financing scheme through commercial banks, the sector risks prolonged stagnation and further erosion of buyer confidence.
According to study published by House Building Finance Corporation Limited (HBFC), the current cost of construction stands at Rs 4,300 per square foot, even a 1,000 sq. ft home worth Rs. 4.3 million would require a monthly mortgage payment of Rs 57,139 at a 15 percent interest rate far exceeding the Rs 9,165 that low-income earners can allocate to housing based on affordability standards.
Even with a 30 percent down payment of Rs. 1.3 million, the remaining loan amount of Rs 3 million would require a monthly payment of Rs. 39,997, which is significantly higher than their entire earnings, the study added.
The study also suggested that provincial Governments need to take proactive steps to improve the quality and affordability of housing for its most vulnerable segment of its population that have been ignored due to the formal recognition of Katchi Abadis.
As fiscal space becomes available the provincial governments need to build an inventory of rental units that meet legal ownership and building standards, focusing on ensuring that public housing comes replete with education, healthcare, public transport and utilities. “A government-backed rental model can lift millions from slums, ensuring they live with dignity and security. By integrating essential services and learning from successful international models, Pakistan can create sustainable urban housing, empowering its low-income citizens to break free from poverty”, the study report said.
Ibrahim Amin, a real estate valuation consultant, said that due to high interest rates and the continuous rise in property prices including soaring construction and land costs a significant portion of Pakistan’s population can no longer afford even a small apartment.
He pointed out that a number of residential societies and apartments in major cities remained unsold because lack of affordable financing facility to the public.
He suggested that a long-term subsidized housing finance scheme is mandatory to empower a segment of the society to own a house on the basis of long-term arrangement with banks and financial institutions, he suggested.
Previously, the federal government launched a mark-up subsidy for the Housing Finance scheme in October 2020, however, the scheme was suspended in June 2022 and now there is not a single affordable housing scheme for the middle class, while on the other side mark-up rate is higher side. The federal government is again planning to launch a new housing scheme and allocated an amount of Rs. 5 for housing finance scheme in the budget 2026, however, it has been yet to be announced.
Housing finance scheme through a transparent mechanism will not only enhance role of the banks in the society but it will boost the economic activities in construction and allied sector, including generation of jobs to skilled and unskilled labourers, said Ibrahim Amin, who is also the Chairman TriStar International, a property valuation company.
The federal and provincial government must also allocate funds to develop low-cost schemes or collaborate with banks to enhance access to credit for housing ownership, he further said.
According to World Bank data, there is over 12 million housing deficits in Pakistan with 56 percent of urban population, around 52.57 million people, live in slums. The population density in urban development makes it easier for governments to focus efforts on making affordable housing accessible to those living in informal housing rather than targeting the entire 240 million population in rural and urban settings.
Copyright Business Recorder, 2025
