Ayesha Saba

Pakistan's housing sector faces a significant deficit in affordable housing for low and middle-income groups, worsened by rapid urbanisation and population growth.

Speaking to WealthPK, Ammar Qureshi, financial officer at Rawaha Estate and Builders, a real estate consultant, said Pakistan’s housing deficit, estimated at over 10 million units, continued to widen due to the lack of affordable financing options for both developers and buyers. “High interest rates and stringent lending criteria have made it difficult for low-income families to secure mortgages, while developers face challenges in obtaining loans for affordable housing projects.” He added that this has created a vicious cycle where demand far outstrips supply, and the housing market remains inaccessible to a large segment of the population.

“To break this cycle, the government needs to extend financial incentives, particularly markup subsidies, which can make housing loans more affordable for low-income groups.” Qureshi maintained that markup subsidies, which reduced the interest rate on housing loans, had been successfully implemented in the past under various government schemes. “For instance, the Naya Pakistan Housing Programme initially promised subsidised financing to encourage homeownership among low-income families. However, the programme has faced delays and implementation challenges, leaving many potential homeowners in limbo.

Re-introducing and expanding such subsidies can reignite interest in affordable housing projects and provide much-needed relief to low-income families. By lowering the cost of borrowing, these subsidies would enable more people to qualify for mortgages and incentivise developers to invest in low-cost housing schemes,” Qureshi emphasised.  Furthermore, he said that access to finance alone was insufficient; parallel efforts were needed to reduce construction costs and provide incentives for developers to invest in affordable housing projects.

“Policies such as tax relief for developers engaged in low-cost housing and streamlining approval processes for such projects could complement financial interventions, creating a more holistic approach to addressing the housing crisis.” Meanwhile, an official from the Ministry of Housing and Works told WealthPK on condition of anonymity that the government planned to introduce major incentives for affordable housing finance, including reintroducing markup subsidies, to ease the burden on low-income homebuyers.

“Proposed measures include fixed-term loans of five, 10, and 20 years, mortgage bonds to enhance investment, and setting up of an apex housing finance institution to streamline operations. “Expanding Microfinance Institutions will improve access to low-cost housing loans, while stronger foreclosure laws and end-user financing models will enhance affordability. Additionally, a proposal to require banks to allocate 10% of private sector credit to housing and construction will ensure sustainable financing for the sector,” the housing ministry official said.

Credit: INP-WealthPk