Moaaz Manzoor

Pakistan’s construction sector is expected to emerge as one of the strongest contributors to economic growth in fiscal year 2026, supported by infrastructure activity and post-flood reconstruction. After a period of weak performance, construction activity is projected to record strong growth as economic conditions stabilize and development activity resumes.

According to the Pakistan Investment Strategy 2026 prepared by Arif Habib Limited, the construction sector is projected to grow by 7.0% in fiscal year 2026, followed by further acceleration to 10.0% in fiscal year 2027.

The report available with Wealth Pakistan notes that construction is outperforming several other sectors of the economy and is playing a central role in driving overall industrial growth. Industrial output is projected to grow by 4.1% in fiscal year 2026, with construction contributing a significant share of this expansion.

According to the document, growth in construction activity is being supported by both public and private sector projects. Infrastructure development and rebuilding efforts in flood-affected areas are identified as key contributors to the sector’s recovery.

The report highlights that construction activity also has strong linkages with other industries. Increased construction demand supports higher output in cement manufacturing, steel and metal production, and related building material industries. Improved performance in these linked sectors further strengthens industrial activity.

Cement production is expected to benefit directly from higher construction activity. Arif Habib Limited, in its report note, renewed activity in both public infrastructure projects and private construction is supporting cement demand and capacity utilization.

The report also notes that construction growth is being supported by improving macroeconomic conditions. Inflation is projected to remain moderate in fiscal year 2026, while interest rates have entered a stabilization phase after a period of easing. These conditions are expected to improve financing conditions for construction-related activity.

Reconstruction work in areas affected by flooding remains an important factor. The document states that rebuilding efforts are contributing to sustained demand for construction services and materials, providing a steady pipeline of activity.

Construction growth is also expected to support employment and income generation. The sector is labor-intensive and plays a key role in absorbing workers across skill levels, which supports broader economic activity.

The report cautions that while the outlook is positive, the pace of construction activity will remain tied to overall economic stability, financing availability, and the continuity of development spending.

Credit: INP-WealthPk