Pakistan, like other developing countries, has been facing a shortage of housing units; and this basic human need is felt more profoundly at the bottom-of-the-pyramid comprising of the poor and financially under-served segments of the society. It is estimated that the annual demand for new homes is approximately 700,000 a year, whereas, only about half of this demand is met. Overall, the housing deficit is estimated at 10 million units and growing.

The housing finance market has been marred by both supply and demand-side challenges. Key supply side issues faced by the industry are lack of adequate foreclosure mechanism, the uncertainty of title deeds, absence of innovative products, risk of maturity mismatch due to unavailability of long-term funding, and lack of skilled mortgaged bankers. Similarly, key issues related to the demand side are escalating property prices, dearth of financing products, unavailability of formal financial services, and volatility in interest rates.

The Government is already taking measures to facilitate adequate housing for all segments of society. State Bank has decided to introduce regulatory and policy initiatives which will also complement the efforts of the Government for the housing industry. The SBP initiatives cover regulatory relaxations to banks/DFIs, the introduction of housing finance targets to banks, and subsidized fixed-rate financial facilities for low-cost housing for special segments. These initiatives are expected to facilitate the promotion of low-cost housing finance in the country.