Pakistan’s real estate sector confronts significant obstacles in property leasing and mortgage systems, hampering investment and impeding sustainable growth.
Adnan Ahmed, a real estate consultant at AH Group of Companies, highlighted the challenges facing Pakistan’s property sector, including inflationary pressures leading to a decline in real property values. He noted the underdevelopment of mortgage financing, characterized by high interest rates and stringent collateral requirements, which limit access to housing finance, especially for middle and lower-income groups. Ahmed stressed the need for urgent economic reforms to stabilize the market and restore investor confidence in Pakistan’s real estate sector, aligning it with the positive growth trends observed in other Asian regions.
Despite the potential of construction and housing to stimulate economic activity and improve living standards, liquidity challenges persist in the real estate market. Banks have become more risk-averse amidst economic uncertainties, resulting in limited availability of mortgage financing, particularly for middle and lower-income groups. This restricted access to financing, combined with high interest rates and a sluggish economy, has constrained the growth of Pakistan’s construction sector, which contributes over 2.5% to the GDP and has links to over 200 industries.
While housing and construction finance saw modest growth in FY2023, rising by 1.33%, the mortgage market in Pakistan remains smaller than those in other Asian countries, with a consistently low mortgage-to-GDP ratio of under 0.5% for over a decade.
