Housing Finance Reforms in Pakistan

Several factors limit the supply of housing in Pakistan. Until recently, the macroeconomic environment, particularly financial instability in the 1990s and high interest rates impeded the flow of affordable long-term housing financing. Today, the sector is still plagued by inadequate long-term finance and a complex web of ineffective property titling and land registration systems that do not reliably guarantee property rights, thus severely limiting access to housing finance.

Recent studies indicate that the lack of finance is primarily a supply problem. Only 1 to 2 percent of all housing transactions in Pakistan are processed through housing finance. Otherwise, most housing finance comes from personal resources. The next source (10 percent) is the informal lending sector, which is poorly regulated, particularly concerning consumer protection (developers’ advances, for instance). The formal financial sector provides limited housing support essentially through three major sources: the government’s House Building Finance Corporation (HBFC), specialized housing finance companies, and commercial banks.

Also Read: Housing Finance Reforms in Pakistan