In a bold attempt to revive Pakistan’s stagnant housing market and promote homeownership among middle- and lower-income groups, the federal government is set to launch a new subsidised housing finance scheme in the upcoming fiscal year.
The initiative, expected to roll out under the supervision of the State Bank of Pakistan (SBP), comes amid growing concerns about Pakistan’s critically low mortgage-to-GDP ratio—currently below 1%, the lowest in the region.
The government has proposed a Rs5 billion subsidy in the 2025–26 federal budget to support the scheme, which will partially cover markup payments to improve affordability for qualified borrowers.
“The housing finance scheme will help revitalise economic activities in real estate, construction, and allied sectors,” said Ibrahim Amin, real estate valuation expert and CEO of TriStar International. “It could also attract local and foreign investments, while generating jobs across the housing value chain.”
Challenges Ahead: Affordability, Execution & Market Confidence
Despite the financial allocation, the scheme is already facing scrutiny over its structure, eligibility criteria, and implementation strategy, which have yet to be finalised. High land and construction costs, paired with limited affordability among target groups, may continue to restrict homeownership access.
Experts also highlight a critical challenge: banks’ reluctance to lend aggressively under subsidised schemes due to operational complexities and default risks.
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The last major housing initiative—Mera Pakistan Mera Ghar (MPMG)—garnered over Rs514 billion in financing requests between 2019 and mid-2022. However, only Rs235 billion was ultimately approved, leading to concerns about execution bottlenecks.
“Unless there is institutional coordination, tax relief, and a robust awareness drive, this scheme may face the same fate as its predecessor,” Amin warned.
Potential Economic Impact and Market Revival
Industry stakeholders remain cautiously optimistic. With the State Bank’s policy rate on a downward trend, some see now as an ideal time to restart subsidised mortgage lending.
“A carefully designed scheme could boost sales of hundreds of unsold or under-booked units in private societies across major cities,” said Amin. “Inflation and shrinking purchasing power have kept genuine buyers out of the market.”
The initiative may also breathe new life into ready-to-move and under-construction vertical housing projects, particularly those aimed at middle-income and overseas buyers.
Housing Crisis: A Supply and Affordability Gap
Pakistan is currently grappling with a housing shortage of 1.2 million units, and homeownership remains out of reach for many due to high upfront costs and interest rates.
Maaz Liaquat, a Karachi-based realtor, believes the new scheme—if well-executed—could address both housing and economic recovery needs.
“Affordable housing finance is key to supporting real estate developers and improving homeownership for first-time buyers,” Liaquat said. He also urged the government to reduce the tax burden on beneficiaries and work closely with local development authorities to streamline approvals and reduce regulatory hurdles.
Conclusion
While the proposed housing finance scheme signals renewed government interest in solving Pakistan’s housing dilemma, its success will depend on policy clarity, coordination with financial institutions, and real-world affordability for the average citizen. With the right reforms and stakeholder engagement, it could become a cornerstone in Pakistan’s path to economic revival.