Pakistan is facing a massive housing shortage, with an estimated 12 million homes needed to meet the growing demand. The housing sector has struggled in recent years, experiencing negative growth. However, builders are hopeful for a revival in construction activity, largely driven by the anticipated flow of liquidity from banks. This is expected to be spurred by falling interest rates, which could help rejuvenate the real estate market.
Developers believe that a strong recovery in the housing sector will have far-reaching benefits for the economy. It is anticipated that the revival will not only improve housing availability but will also provide a much-needed boost to over 70 allied industries, generate employment opportunities, and contribute to overall economic growth.
In a recent meeting with Prime Minister Shehbaz Sharif, Hassan Bakhshi, Chairman of the Association of Builders and Developers (ABAD), presented the challenges facing the sector. During the meeting, the prime minister acknowledged the importance of the builders’ proposals but stressed the need for genuine construction activity rather than speculative trading in real estate. He further requested the builders submit revised proposals within ten days, signalling the government’s willingness to support the sector, particularly in addressing the needs of low-income families.
Bakhshi highlighted that despite the cement industry operating at only 30% of its capacity, local cement prices remain significantly lower than those in the Middle East. He called for long-term subsidised financing to kick-start housing development, noting that during the previous administration, over 31,000 houses were financed at fixed subsidised rates, demonstrating the potential impact of such policies.
However, banks are currently reluctant to offer large-scale, long-term financing without substantial government intervention. They argue that without government support to offset higher interest costs, housing loans will remain financially unviable for many buyers. The lack of a robust mortgage financing system is also seen as a significant barrier to homeownership, as many prospective buyers are unable to secure loans with terms that are comparable to rental costs.
Bankers have raised concerns about the risks associated with long-term financing, warning that defaults could undermine the stability of the banking sector. Instead, they have pointed to government bonds as a safer investment, which continue to yield record profits for financial institutions.
