Pakistan is caught in a significant housing crisis, with a shortfall in the construction of over 12 million houses. The alarming situation is fast worsening since demand for housing is rising steadily, especially after the interest rates began to fall. Lower interest rates generally encourage people to invest their money in property rather than keeping it stagnant in the bank, thus raising the demand for affordable housing solutions.
Impact on the Economy Due to Housing Shortfall
The Builders and Developers Association of Pakistan believe a serious revival of the housing and construction sector could act as an engine of growth for the economy. The construction industry is a potential provider of jobs and demand for more than 70 allied industries, as per local news reports. This multiplier effect could substantially contribute to the country’s economy, making it vital for the government to tackle this housing shortfall in the first place.
Government Strategy and Proposals
In light of these problems, the chairman of the Association of Builders and Developers emphasized recently that Prime Minister Shehbaz Sharif did commend their proposals for addressing the housing crisis. However, the Prime Minister remains concerned over speculative trading in the property market. He has asked that fresh proposals be submitted in 10 days, pointing out that he would like to support low-income housing projects.
Concern Regarding Prices and Capacity
The ABAD chairman has also indicated that housing prices in Pakistan are, at least compared to the Middle East, relatively lower, even though the cement industry in the country runs only at 30 percent of its entire capacity. He has asked the government for the revival of long-term subsidized financing mechanisms similar to those in place during the tenure of the previous government. Such financing enabled the provision of over 31,000 houses, with fixed subsidized rates from 2018 to 2022.
Difficulties Confronting Mortgage Financing
There is a strong demand for housing finance, and yet, the banking community states large-scale financing for housing projects still remains a dream. The mortgage lending system in Pakistan is still in its infancy. Banks are reluctant to issue long-term housing loans owing to potentially high risk of default. Home finance would allow buyers to pay in installments, much like they would pay rent for the property, but this will continue to be a challenge in the present banking environment.
Conclusion
The combination of steady escalation of the housing crisis in Pakistan and urgent intervention on the part of both the government and the banking sector is key to finding sustainable solutions to allow affordable housing into the hands of the needy.
