Pakistanis have become accustomed to hearing a familiar statistic: the country faces a housing shortage of more than 10 million units. The figure appears in government speeches, development reports and newspaper headlines with remarkable consistency. Policymakers respond predictably. More housing schemes are announced, more construction incentives are offered and more promises are made to bridge the gap. The assumption underlying these efforts is simple: Pakistan's housing crisis exists because there are not enough houses. What if this is not the case?
The Real Issue: Affordability Over Shortage
The housing issue in the country is not an absolute shortage of housing. It is a lack of affordable housing. It is a semantic difference, but it is central to one of Pakistan's most chronic policy failures. Current projections indicate that Pakistan needs almost one lakh houses a year to meet the demands of population growth and urbanisation. The total housing shortage has been estimated to exceed 10 million units and is growing. But even people studying the housing sector have wondered if the debate has now become caught up in the "headline deficit" and lost sight of the economic principles behind the issue of affordability.
Contradictions in the Market
The antithesis is hard to miss. If Pakistan had no houses at all, then it would be expected that there would be unparalleled homelessness throughout the country. But the more apparent truth is otherwise. There are housing societies, investment plots, empty plots and partially filled housing societies in cities. Construction continues. Land changes hands. Billboards and television screens are filled with real-estate ads. However, millions of homes are still out of reach for the average homebuyer.
There is just as much an issue with the lack of available homes as there is with the lack of housing affordable to the average person. What has changed is that more and more people can no longer afford a home. Today, housing in urban centres is increasingly an asset for investment, not a commodity for consumption. This is the case all over Pakistan. Plots are sold not to be built on, but for enjoyment. Often, investors purchase land with no intention of developing it. Just as housing societies promote community living, they promote the returns expected as well. In many cases, the value of a plot increases, not just due to development that will bring productivity but because there will be investors willing to pay more for it.
Speculation Over Productivity
This phenomenon has drastically changed the economics of urban land. Higher prices have adverse consequences for people who want to own a home, but they are beneficial for existing landowners and price speculators. The dream of home ownership continues to slip further away from the reality of young professionals, working families and middle-income families each year. The irony is that the housing market in Pakistan can actually pay off for doing nothing. An entrepreneur who is investing in manufacturing has to deal with taxes, regulatory issues, competition from exports and risks associated with business operations. An investor who owns property can make significant income by sitting on the sidelines. Not surprisingly, money is put into speculation instead of productive business.
Broader Economic Impact
The effects are not just on housing. If wealth is accumulated in unproductive assets, economic growth is affected. Money that could be used to build factories and businesses for technology or export goes into land speculation. Housing affordability declines and wider economic dynamism fades. These issues are exacerbated by the financing system of the housing market in Pakistan. In most developed countries, households use mortgages to transform future earnings into current home ownership. You do not have to save up the entire worth of a house in order to buy one, and that is the case with a teacher, engineer or civil servant. Long-term credit helps fill in the gap.
Weak Mortgage Market
In Pakistan, not many have such opportunities. The mortgage-to-GDP ratio is around 0.3 per cent, which is among the lowest in the world. In Malaysia, it is over 44 per cent, and in Germany, more than 34 per cent. Pakistan's formal housing finance market only caters to a very small number of people who are in the market for housing. The consequences are very dramatic. In nations with a strong mortgage market, home ownership is largely determined by income and creditworthiness. In Pakistan, it is usually based on inheritance, family assets, foreign remittances or decades of saved money. For many, home ownership is no longer a sign of prosperity, but a matter of great fortune.
Urban Planning Failures
Urban planning has exacerbated the situation. Cities in Pakistan grow horizontally with low-density housing estates, which are built at the cost of agriculture and raise transport expenses. Urban low-income housing, often lived in by renters of apartments, is underdeveloped. Regulatory constraints and an uncoordinated governance framework, with substandard municipal institutions, add to the development cost.
Paradigm Shift Needed
The housing debate in Pakistan thus needs to have a paradigm change in thinking. The primary question is not the number of housing units that can be constructed. It is who can afford them. There is no need for Pakistan to increase the size of its real-estate sector. It needs a more functional housing sector. The country will keep on constructing houses as if they were the answer to its housing problems until policymakers are aware of the difference.
Khaliq Dad Lak
The writer is a civil servant. He can be reached at khaliqlakk1@gmail.com
