Closing the housing gap in Pakistan

Pakistan is facing a serious housing crisis. The gap between the demand for housing and the available supply is growing at an alarming rate. This issue is particularly noticeable in urban areas where the population is expanding rapidly, and the need for affordable, high-quality housing has never been more urgent. Without immediate action, the housing situation in Pakistan is likely to worsen, making it increasingly difficult for many families to find suitable homes.

As of now, Pakistan needs approximately 38.34 million housing units, based on the number of households across the country. However, the supply stands at only 36.24 million units, leaving a shortfall of 2.1 million units. Every year, the demand increases by around 1.06 million units, driven by population growth and the creation of new households. This gap is widening each year, adding another 25,000 units to the deficit. The consequences of this growing shortage are felt by millions of families, impacting everything from economic stability to the quality of life for those struggling to find homes.

The housing shortage isn’t equally distributed between urban and rural areas. In cities, the deficit is estimated to be over 9 million units. This is largely due to the high number of people migrating from rural areas to urban centres in search of better job opportunities and living conditions. Urban areas require around 350,000 new housing units each year, but only about 150,000 are being built annually. This leaves a massive gap that’s hard to bridge.

Meanwhile, rural areas also face a housing shortage, though it’s more related to the quality of the homes than the sheer number. Around 2 million units are needed, but many of the homes in rural regions are poorly constructed using temporary materials. Millions of families live in kacha (temporary) or semi-pakka (semi-permanent) houses, lacking essential infrastructure such as sanitation, plumbing, and electricity.

The most affected by this housing crisis are low- and middle-income groups. For those in lower-income households, about 217,000 new units are needed annually. These families often struggle to access formal financing and are unable to afford the rising costs of land and construction. Similarly, lower-middle-income groups, such as salaried professionals and small business owners, require about 87,500 units each year. Despite earning slightly more, they still face difficulties due to the high cost of housing, which remains out of reach for many.

Higher-income groups have a relatively smaller demand for new housing, around 35,000 units annually. These individuals are typically in a better financial position, with easier access to loans and better-quality housing. As a result, they face fewer barriers in the housing market compared to lower-income families.

In addition to the shortage of units, overcrowding is a major issue. Around 13 million households across Pakistan are living in overcrowded conditions, with urban areas contributing to 6 million of these households and rural areas adding another 7 million. Many of these households live in substandard housing, homes without proper sanitation, electricity, or quality materials. This is a problem in both urban and rural areas, where families are often forced to make do with whatever they can afford.

Despite these challenges, Pakistan’s real estate market shows signs of growth, especially in cities like Karachi and Lahore. One key factor contributing to this growth is mortgage financing, which currently makes up only 0.44% of the country’s GDP. While this shows that the housing loan market is still underdeveloped, it also presents a significant opportunity to stimulate growth in the sector. Legal and regulatory reforms, such as improving property title clarity and streamlining transaction processes, could attract much-needed investment.

In Karachi, for instance, property prices have increased significantly in just one year. In areas like DHA Phase V, the price of a 500-square-yard house has risen to 13 crore rupees, and a 1,000-square-yard house now costs 19 crore rupees. Similarly, Lahore has seen rising demand, with a 5-Marla home (125 square yards) now priced at around 3.50 crore rupees, and larger homes reaching up to 15 crore rupees. While this reflects the high demand for housing, it also highlights the growing affordability crisis.

For the housing market to remain sustainable and inclusive, affordable housing solutions must be found. One potential solution is the adoption of affordable, high-quality construction materials. Countries like China have developed cost-effective building materials without compromising on quality. By importing and using these materials, the cost of construction could be significantly reduced, making homeownership more attainable for a larger portion of the population. These materials such as prefabricated panels, advanced cement composites, and steel products are durable, reliable, and widely used in global construction projects.

The government could play a pivotal role in encouraging the use of these materials by offering incentives to developers who use affordable construction materials that meet Pakistani building standards. This would help reduce the overall cost of housing, particularly in the low-cost housing sector, and could make it easier for middle-class families to afford homes of their own.

Looking forward, the key drivers for the growth of Pakistan’s housing sector will include population growth, the expansion of mortgage financing, and legal reforms. By adopting more affordable construction methods, the country could dramatically reduce the cost of building homes, making housing more accessible to the middle class. With the right policies and initiatives, Pakistan’s housing market could experience sustainable growth, ensuring that more families have access to quality housing without financial strain.

In conclusion, while the housing deficit remains a significant challenge, there are clear opportunities for reform and innovation that could ease the crisis. By increasing the supply of housing, improving the quality of construction, facilitating access to financing, and embracing affordable construction materials, Pakistan can begin to address its housing shortage and improve the lives of millions of citizens.

The figures and data presented in this article are sourced from reports by the “Pakistan Mortgage Refinance Company (PMRC),” “UN-Habitat,” and the “ACASH Report (2023),” which outline the housing deficit, market trends, and challenges across different income groups in Pakistan. The information regarding property prices was drawn from recent real estate market trends observed from July 2024 to 2025.

Copyright Business Recorder, 2025