According to a World Bank study, Pakistan’s housing shortage is currently estimated at approximately 12 million units and the number is growing from year to year. In urban areas 47 percent of households live in overcrowded housing units in informal settlements (katchiabadis) with inadequate infrastructure and services. Using data from the Pakistan Household Integrated Economic Survey (HIES) 2018-19, the Residual Expenditure Method (REM) was used to estimate housing unaffordability for households in urban parts of the country.
The findings suggest that approximately 25 percent of households are unable to cover their basic food and non-food, non-housing expenses after accounting for housing costs, with the poorest segment facing the highest affordability challenge (94 percent). However, as per the expenditure-to-income ratio (EIR) approach, housing is unaffordable for only 44 percent of households and that housing is least affordable for the highest quintile, with close to 60 percent of households spending more than 30 percent of their household income on housing.
The Seventh Population and Housing Census 2023, the first-ever digital census was carried out by the Pakistan Bureau of Statistics (PBS) and reported 38,292,556 households in 2023 with, on average, six members per family though some provinces registered a higher rate, giving a total population of 230 million people. The actual population in 2023 was calculated at around 241 million people.
In a recent report, the Association of Builders and Developers (ABAD) said that Pakistan faces a shortfall of over 12 million houses as demand has risen following a decline in key lending rates which encourages individuals to invest their money in real estate instead of keeping in banks. Owning a home is considered a financial asset, but for an average Pakistani, this goal is becoming increasingly unattainable. Property prices have jumped too high, while stagnant wages and rising inflation make it harder for middle-income households to save enough to build a house. As real estate prices continue to surge, owning a house is a distant dream for millions of people.
A study on the 2017 census by Arif Hasan with Hamza Arif titled Pakistan: the causes and repercussions of the housing crisis highlighted the prevalence of three factors. First, urban housing demand is 350,000 units with 217,000 for lower-income groups, 87,500 for lower-middle income groups, and the remaining 10 per cent for higher and upper middle-income groups. Formal supply per year is 150,000 units. Second, unmet demand is met through two types of informal settlements – occupation and subdivision of government land (katchiabadis) and informal subdivision of agricultural land on the periphery of urban settlements with provincial governments promoting regularisation and possible improvement of informal settlements.
With Pakistan’s young population entering the workforce and migrating to urban centers, the demand for housing will grow further in the coming days. Buying a first home is now significantly harder for younger generations than it was for their parents. Previous generations benefitted from lower property prices, stable employment, and joint family structures that allowed them to pool resources for home purchases. Today, property prices have far outpaced income growth, making it difficult for younger individuals to enter the market. In urban centres, the situation is even worse, with land scarcity and high demand driving up prices further.
Older generations often acquired property at a time when real estate was more affordable, and financing options were more accessible. Today, mortgage lending remains limited and high interest rates make it difficult for the middle-income group to afford long-term loans. Additionally, the shift toward nuclear families goes against the pooling of resources, leaving younger generations with fewer financial options for homeownership.
Without government intervention, housing will continue to be a financial burden for future generations. Policymakers need to address the crisis by promoting low-cost housing projects, improving mortgage accessibility, and regulating rental markets to prevent excessive rent hikes. If left unaddressed, the housing crisis will deepen economic disparities, making financial stability unattainable for a growing number of Pakistanis. The lack of affordable mortgage financing remains a hurdle for many potential homebuyers. Home financing can enable buyers to pay in installments similar to rental costs, but banks are hesitant due to the high risk of default. Banks still remain reluctant to engage in long-term housing loans.
Lately, the government has been exploring options to make homeownership more accessible. Previously, the government extended fiscal and monetary incentives including amnesty schemes with the objective of easing the housing shortage, promoting growt, while generating employment opportunities. Sometime back 5- to 10-marla government land was given away to low-grade government employees and, more recently, Prime Minister Shahbaz Sharif and Punjab Chief Minister Maryam Nawaz built low-cost housing for the poor section of the population.
In the past few years, the government of Pakistan has come up with affordable housing policies that enhanced affordable house construction. One of them is Naya Pakistan Housing Program (NPHP), initiated in 2018 aimed at building five million affordable houses for low and middle-income families. NPHP is one of the key initiatives, dedicated to solving the problem of housing deficit and encouraging private developers, financial institutions and other governmental organizations. Mera Pakistan Mera Ghar (MPMG) is another important project aimed at providing cheap or affordable rates of house finance services to low and middle income families for buying or constructing their house. If these financing schemes are speedily implemented , homeownership should become more feasible for the common man in the coming days.