This working paper aims to analyze the policy direction for one of the foremost priority areas of the government housing. The flagship Naya Pakistan Housing Programme conceived to make available five million housing units primarily for low has been income groups over the next five years. Policy and institutional design to deliver on this rather aggressive and ambitious agenda will require a middle out approach.

Local past failures and international success stories have much to offer to inform robust policy and administration in this vertical. This paper presents an analysis of the housing market at present. It then highlights two major pitfalls that must be avoided: low– rise urban expansion and fizzling out of the envisaged housing finance uptake. Finally, calibrations to the policy focus that can prove critical in achieving intended outcomes are discussed these are urban planning reforms for high rise housing, affordable housing obligations and a tailored financing framework for middle income groups.

Pakistan’s grossly inadequate housing supply is evident from the national housing deficit estimated at 10 million units1. It is projected that this gap increases by 350,000 units every year with the incremental deficit expected to rise to 400,000 units per annum in the near future. There are three drivers of the housing crisis in the country. The first is demographic and social. Pakistan has a growing population that is urbanizing rapidly4. The production of new stocks of housing is unable to keep pace with this rising population, and its rapid urbanization. Emerging household formation trends also exacerbate the problem, especially the nuclearization of the urban Pakistani family.