Mortgage Matters: Exploring Housing Finance in Pakistan Along with Asian Countries

The housebuilding segment in Pakistan’s total credit market experienced modest yet significant growth, increasing its share from approximately 0.43% in December 2019 to about 0.56% by December 2023. This growth indicates the sector’s rising prominence in the credit landscape, though it still occupies a small overall fraction.

This trend suggests house building is gaining importance within consumer finance, possibly driven by government housing initiatives, increasing demand for residential properties, and favorable lending conditions. Nonetheless, the sector faced challenges like rising construction costs, disruptions in funding schemes like Mera Pakistan Mera Ghar, high interest rates of up to 22%, policy uncertainties, and a slowdown in construction due to high input costs. Despite these obstacles, the notable growth over four years demonstrates the housing finance market’s resilience and expansion in Pakistan.

The price-to-rent ratio of 18 in Karachi implies that buying a property costs the equivalent of 18 years of rent. This ratio, aligning with higher-cost markets like Singapore, presents a seemingly paradoxical situation. Despite Karachi’s low property purchase prices, the rental market does not yield high returns, suggesting a nuanced market dynamic.

Mortgage-Matters-Exploring-Housing-Finance-in-Pakistan-Along-with-Asian-Countries

Also Read: Housing Finance: Investment Opportunities for Pension Funds