Islamabad, Feb 18: Pakistan is currently grappling with a housing deficit of over 12 million units as demand continues to outstrip supply. This situation has been exacerbated by a decline in key lending rates, which typically prompts individuals to invest in real estate rather than traditional banking options. The real estate sector is seen as a safer avenue for securing capital, especially in times of economic uncertainty.
Industry experts, particularly from the Association of Builders and Developers (ABAD), argue that revitalizing the housing and construction sectors could create jobs and stimulate growth in over 70 associated industries. Recently, the ABAD Chairman emphasized that Prime Minister Shehbaz Sharif has acknowledged their proposals but remains cautious about speculative trading in real estate. The Prime Minister has requested updated suggestions within a 10-day period and expressed a strong interest in supporting affordable housing for low-income groups.
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Despite the challenges, ABAD leaders pointed out that property prices in Pakistan remain significantly lower than those in the Middle East. This, they argue, makes real estate an attractive investment option, particularly as the cement industry in the country operates at just 30% of its full capacity. The chairman also called for the revival of long-term subsidized financing programs, similar to the ones initiated by the previous government, which financed over 31,000 houses between 2018 and 2022 through fixed-rate loans.
However, banking experts caution that such large-scale financing is currently unfeasible in Pakistan. Mortgage lending is still in its nascent stages, and financial institutions remain wary of long-term housing loans due to concerns over potential defaults. While home financing has the potential to make housing more accessible by allowing buyers to make installment payments similar to rent, the risk factors involved have made banks hesitant to fully embrace this model.
As the demand for affordable housing continues to grow, the challenge lies in creating a sustainable and scalable financing model that can overcome the current barriers in Pakistan’s housing market.
