Can Pakistan’s housing sector survive the 12 million home shortage?

KARACHI: The housing sector in Pakistan is facing a significant challenge, with a demand for over 12 million houses across the country, which is further exacerbated by the negative growth experienced in the sector.

Banking experts believe that the increased liquidity resulting from falling interest rates might flow into the property market, potentially stimulating growth in housing and construction.

Builders and developers are optimistic about the housing sector’s potential to boost economic growth and anticipate that the sector will not only create employment opportunities across more than 70 allied industries but also contribute significantly to the overall economy.

Hassan Bakhshi, Chairman of the Association of Builders and Developers (ABAD), recently presented suggestions to Prime Minister Shehbaz Sharif. The Prime Minister expressed appreciation for the proposals but expressed his preference for actionable progress rather than bureaucratic processes.

Sharif is keen on accelerating the housing and construction sector, particularly for the benefit of low-income families and has requested a revised set of ideas within 10 days, showing his willingness to endorse proposals that could invigorate the sector.

Qatar to broaden investments in Pakistan’s power and housing sectors

Bakhshi also pointed out that the cement industry in Pakistan was operating at only 30 percent of its capacity, while cement prices were about half of those in the Middle East. He emphasised the need for long-term subsidised financing to revitalise the housing sector, citing the previous government’s initiative, which financed over 31,000 houses at subsidizsed fixed rates.

However, bankers express concerns about the feasibility of banks providing substantial long-term financing, as they are reluctant to take on the associated risks due to the high default risk in such cases.

Banks are currently making significant profits through investments in risk-free government bonds. Furthermore, Pakistan faces a shortage of mortgage financing, which would typically allow the average person to purchase a house and manage payments akin to rental income.