Pakistan’s real estate industry is touted as one of the most lucrative sectors of the country. It also contributes a sizable portion to the country’s Gross Domestic Product (GDP). With many state-of-the-art projects being launched, local and overseas investors have started taking a keen interest in the real estate market, which is causing property prices to go further up.

Despite such an immense rate of progress, like any other field, the property sector of Pakistan also faces challenges. These issues may negatively impact the performance of almost all the key stakeholders of the industry in different ways, which often cause unsuspected delays in the development and launch of real estate ventures.

Some of the structural issues of Pakistan’s real estate sector are related to property leasing and mortgaging. Leasing a property is a contractual binding between a tenant and a property owner
that gives the right to a tenant to live in a property owned by another person for a specific period. This agreement can be renewed upon the end of the agreed duration. Lease is not limited to only housing, it is also practised for commercial properties and businesses. In mortgage financing, a loan is used to purchase or maintain a house, or, land. It is a long-term loan given by a lender to a borrower to finance a real estate property.

In Pakistan, the pertinent building control authority does not recognise a large amount of property which narrows down the option of leasing a property. These unrecognised properties offer low rates and rents due to which many residents live in these areas. Other than leasing a property, there is an option of mortgaging it. However, at present, mortgaging is quite unaffordable for people. Recently, the SBP increased the interest rate from 9.75% to double-digit at 12.25% and then to 13.75%. Due to the increased interest rate, mortgages have become unaffordable for the common masses. Pakistan is mostly a cash market, and a mortgage market is difficult to develop in the country due to the tax foreclosure laws and high-interest rates. These are structural issues of the real estate industry that can only be made effective by discouraging rent-seeking and a cash-based economy.


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