Inadequate Housing in Pakistan: A Need for Low-Cost Housing Schemes

Inadequate Housing in Pakistan: A Need for Low-Cost Housing Schemes

Access to adequate housing ensures the prosperity and sustainability of urban development. It is one of the key inputs in the social, economic, and civic development of a country. However, in several developing countries including Pakistan, housing has become a defining economic issue. Around 99 percent of housing in Pakistan is beyond the buying power of 68 per-cent of the population (IIED, 2018). People come to cities in search of better opportunities and living conditions, but due to the housing shortage, it becomes increasingly difficult to provide shelter to these poor people, resulting in informal settlements and slums. Therefore, there is a dire need to provide low-cost housing for poor people to mitigate the harmful effects of rapid urbanisation and reduce urban poverty.

Housing Crisis in Pakistan

According to an estimate, out of 229 million people in Pakistan, more than one-third live in 20.01 million houses in urban areas of Pakistan and the remaining live in nearly 13 million houses in rural areas. According to another estimation, the current housing shortage in Pakistan has grown from 4 million to 10 million housing units, over half of which are in urban areas which are likely to grow to 17.2 million units by 2025. Insufficient provision of housing, infrastructure, and basic urban facilities restrain the ability of a region’s cities to fulfil the needs of the urban masses. The housing shortage in Pakistan has resulted in more people living in one room. On average, about three people live in a room in Pakistan, as compared to India’s 2.7 and Sri Lanka’s 2.2. In 1998, the United Nations estimated these numbers with a split of urban (2.8 persons) and rural (3.1 persons). However, after 22 years, these numbers have increased due to population growth and the rising shortage of housing units in Pakistan. The majority of these figures refer to formal housing units. According to a World Bank study in 2018, about 40.1% of Pakistan’s urban population lives in informal settlements.  Due to the current housing crisis, the majority of migrants are forced to live in informal squatter settlements that take over agricultural land. Both quantity and affordability are the key functions of the deficiency of housing in Pakistan. In order to cope up with this issue, the Government of Pakistan needs to take strong initiatives like introducing low-cost housing schemes, to bridge the gap between the supply and demand of housing units in the country.

Low-Cost Housing: Need of the Hour

Housing is an integral part of a family’s well-being that defines the members’ individual, social, health and living conditions. However, due to rapid urbanisation, providing affordable housing to city dwellers, especially to the poor is one of the biggest challenges the country is facing. Apart from availability and access to finance, land cost and availability are the major determinants of the shortage of housing units in Pakistan. To overcome this challenge, the government needs to introduce low-cost housing schemes under which housing loans are provided to deserving ones, ensuring that affordable housing does not become a luxury good. In this context, the real estate industry, real estate professionals, and developers can play a positive role by launching housing schemes for low-income groups. Investing in low-cost housing projects is economically beneficial for the real estate sector as it will generate numerous job opportunities during the construction process. Furthermore, building more affordable housing will help boost the businesses of Small and Medium Enterprises (SMEs) that work on house building. Therefore, to put an end to the country’s housing crisis, it is mandatory that the stakeholders like developers, planners, governments, and fiscal and regulatory agencies must be collectively engaged to address affordable housing challenges, both from its supply-side and finance-side parameters.

Government Policies to Launch Low-Cost Housing Programs

Considering the housing shortage in Pakistan, the former government had taken the initiative to launch a low-cost housing program called Naya Pakistan Housing Program (NPHP) in 2019 to provide affordable housing to the low and middle-income class by combining elements of public-private partnership. The main objective of this project is to provide five million housing units within a period of five years in the form of apartments, houses, and high-rise buildings. Under this project, the government was the enabler and facilitator, not the developer. Around 41 companies had given proposals for the construction of houses under this program. The project collaborated with banks to provide incentives for the purchase of units based on the mortgage financing model. Under this program, the borrowers were not supposed to pay more than 30 per cent of the property value as the down payment which could be paid in instalments also. In some deserving cases, the limit could be reduced to 10 per cent of the value. This program also aimed to provide basic urban services like improved sewerage systems, water supplies, service roads, electricity, parks, and basic health and educational facilities in urban and peri-urban areas. To make it a successful public housing program, the government released Rs 3.35 billion to construct more than 7,000 housing units across Pakistan. Furthermore, another subsidy of Rs 30 billion was released to build more houses to meet the country’s housing demand. According to estimation, a 100,000 increase in housing units in a year could drive growth in over 50 allied industries and contribute as much as 2.2 percent to the country’s GDP.

Key Challenges in the Provision of Low-Cost Housing

There are several concerns regarding affordable housing schemes and their viability as a solution to the housing problem of poor and lower-middle-class groups. The NPHP was not the only public housing program; from Karachi’s Korangi in the 1960s, the resettlement of Katchi Abadi residents in the 2000s, to the Ashiana Housing Scheme in 2010, different governments launched such schemes. However, not a single program could complete its respective target. According to a federal minister for housing, the Pakistan Housing Authority could only make 580 homes for the government sector employees in a decade. All of these programmes had many weaknesses including speed of work, the unwillingness of commercial banks to increase loan processing etc.

A major factor responsible for the inefficiencies of such housing programmes is the poor mortgage industry. Housing development depends on a strong mortgage market. However, the condition of the mortgage industry in Pakistan is much worse as the country stands lower in terms of Mortgage to GDP Ratio compared to the regional and global situation.  Many countries have overcome their housing shortages by creating a mortgage industry and providing the common people with a wide range of loans to buy or build a home. It is observed that without a strong mortgage industry, housing programmes cannot achieve their targets.

Way forward

It has been observed that the success of affordable housing programs requires conventional strategies, long-term planning, and a strong financial model to ensure housing availability for deserving ones. Furthermore, the inefficiencies in the property and housing market will need to be addressed through the power of the state to keep the affordable housing stock growing even in the long run. Also, the government must introduce more low-cost housing schemes for the low and middle-income masses. In this regard, the private sector can become a great asset for the government to fill the country’s housing demand gap. Public-private partnerships help overcome the challenges of providing affordable homes to millions across the country. To fulfil the housing demand, the government of Pakistan needs to provide a special subsidy dedicated to the construction industry, making the project more financially viable. Also, proper planning, development, monitoring, and policy-making are needed to meet mitigate the increasing housing demand.


According to the World Urban Forum III, the world is facing a global housing crisis. Due to the increasing population and rapid urbanisation, the housing shortage has become a perennial problem in developing countries. Pakistan is facing a severe housing crisis, affecting the lower and middle-income classes. In these circumstances, the government can provide shelter to the needy through affordable/low-cost housing programmes. Providing affordable housing to deserving ones will not only fulfil the housing demand gap in the country but also provide job opportunities to the labourers during its construction process, boosting the overall growth of the country’s economy.

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IMARAT Institute of Policy Studies

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