The rapidly growing urban population shapes the strong underlying demand for housing in Pakistan; the actual market activity, however, is dampened by the weak purchasing power of the population, exacerbated by increasing prices and limited financing options.

This extended overview from the Global Property Guide covers key aspects of Pakistan's housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Residential Hotspots
• Supply and Demand Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

House prices in Pakistan have continued their upward trajectory, driven by a high inflationary environment and significant increases in construction input costs over recent years. As of January 2025, the Residential Property Price Index for houses in Karachi - Pakistan's largest and most urbanized city, historically the country's leading real estate market - rose by 10.54% year-on-year (7.95% in inflation-adjusted terms), according to data from the property portal Zameen. In contrast, the index for apartments recorded a more moderate increase of 3.82% (1.39% inflation-adjusted).

Pakistan's house price annual change:

While price trends vary across the analyzed submarkets, the broader long-term trend of appreciation remains evident in urban centers. In nominal terms, as of January 2025, house prices in Islamabad were the highest among the cities surveyed, averaging PKR 30,140 (USD 108) per square foot. In the apartment segment, Gujranwala recorded the highest prices at PKR 19,770 (USD 71) per square foot.

Average price dynamic in selected submarkets:

Experts at the Pakistan Credit Rating Agency (PACRA) highlight that rising house prices, combined with stagnant income levels and elevated borrowing costs, have dampened housing demand among the general public despite strong population growth and increasing urban migration. "Purchasing power is one of the key factors that influences the demand for housing. Although housing is present, people are unable to purchase those houses", adds the comprehensive market analysis by PMRC.

Research from Savills reinforces this view, noting that Pakistan's residential sector in Tier-1 cities, including Karachi, Islamabad, and Lahore, was largely driven by speculative investors rather than end users throughout 2024. "Over the past 12 months, demand has dropped significantly, leading to lower take-up rates compared to previous years," states Savills' Pakistan Real Estate Market Overview 2024. In turn, the combination of declining demand and escalating construction costs has negatively impacted the construction sector, slowing down the planning and development of new housing supply and further widening the country's housing deficit.

Despite these challenges, the long-term outlook for Pakistan's housing market remains optimistic. "Although the sector has recently slowed, we are confident that as the economy stabilizes, the market will regain momentum in the coming years," notes Savills. Analysts anticipate a recovery driven by moderating inflation, potential reductions in policy rates, continued urbanization, and the expansion of the middle class. At the same time, addressing the housing shortage and ensuring affordability remains a critical challenge that will require coordinated efforts from both the public and private sectors.

Residential Hotspots:

Vertical Housing Profile in First Tier Cities

Vertical housing is becoming an increasingly important segment of Pakistan's real estate market, driven by rapid urbanization, rising land prices, and changing lifestyle preferences. While horizontal developments have historically dominated the country's housing landscape, growing population densities and land constraints have intensified the demand for high-rise residential options. This shift is most pronounced in major urban centers, where apartment living is gaining traction due to its efficiency, convenience, and access to modern amenities.

Karachi, Islamabad, and Lahore, Pakistan's largest and most developed real estate markets, serve as the focal points for vertical housing developments, offering high-quality apartment options that cater to a diverse range of buyers, from local professionals and families to overseas Pakistanis. As urban congestion increases, centrally located projects with premium finishes in these Tier-1 cities are expected to attract growing interest, reinforcing the long-term investment potential of apartment living.

Karachi

Karachi, Pakistan's largest and most populous city, has an estimated population of 20.3 million and spans 3,527 square kilometers. The city's real estate market is shaped by its diverse demographics, strategic coastal location, and economic significance. Housing demand is fueled by a growing middle class seeking affordability, high-net-worth individuals investing in luxury properties, and a sizable expatriate community.

The increasing population has placed significant pressure on housing availability, further exacerbated by inter-city and rural-urban migration. This demand has led to radial expansion along major highways, while apartment developments are increasingly concentrated in central areas such as Clifton and DHA.

As of 2024, Karachi had approximately 1,552 Grade B apartments, with an additional 2,404 Grade A and B units expected to be delivered over the next five years, according to Savills. This 55% increase in supply reflects developer confidence in long-term demand, despite economic headwinds such as inflation-driven construction costs and import restrictions affecting furnishing expenses.

Currently, Karachi does not have any Grade A apartment developments. Prices for existing Grade B apartments ranged between PKR 25,000-35,000 (USD 90-126) per square foot as of 2024.

Islamabad

Islamabad, Pakistan's capital, is known for its planned urban layout and political stability. The city attracts government officials, diplomats, and professionals, contributing to steady growth in its real estate sector. With a well-defined zoning structure and strong infrastructure, Islamabad has evolved into a major business center, drawing both skilled and unskilled labor from across the country.

Apartment development activity has accelerated in Islamabad and its twin city, Rawalpindi, with southern expansion leading to the emergence of new residential communities. The market remains investor-driven, with increasing demand for high-end residential units.

According to Savills, Islamabad had an existing supply of over 1,600 Grade A and B apartment units in 2024, with an occupancy rate exceeding 80%. An additional 800 Grade A units are expected to enter the market in the coming years, particularly in DHA, New Blue Area, and Bahria Town, where infrastructure and amenities support residential growth.

As of 2024, Grade A apartment prices in Islamabad ranged PKR 35,000-50,000 (USD 126-179) per square foot, while Grade B units were priced between PKR 25,000-35,000 (USD 90-126) per square foot.

Lahore

Lahore, Pakistan's second-largest city and a cultural and historical hub, continues to experience strong real estate demand. Population growth and infrastructure improvements have contributed to its resilience as a prime investment destination, even amid broader economic uncertainties.

The city's property market offers a blend of traditional and contemporary housing styles, catering to a diverse population with varying budgetary and lifestyle preferences. While Lahore's residential sector has traditionally been dominated by bungalow-style developments, there is a growing shift toward mid-rise apartment living. This transition is driven by the appeal of centrally located residences with modern amenities, securitized parking, and lower maintenance requirements.

According to Savills, Lahore's supply of Grade A and B apartments stood at 1,447 units in 2024, primarily concentrated in Gulberg and DHA. By 2028, total inventory is expected to rise to 4,265 units, representing a five-year compound annual growth rate (CAGR) of 24%.

As of 2024, prices for Grade A apartments in Lahore ranged from PKR 35,000-45,000 (USD 126-161) per square foot, while Grade B units are priced between PKR 21,000-27,000 (USD 75-97) per square foot.

Supply and Demand Highlights:

Rapid Population Growth Meets Housing Shortages

The increasing population and rapid urbanization continue to be the primary drivers of residential demand in Pakistan. According to the latest Census, the country's population reached 241.5 million in 2023, reflecting a significant increase of 33.82 million since 2017, representing a growth of 2.55% over the period. Concurrently, the number of households - a key determinant of housing needs - rose by 19% to 38,340,566.

While official data on Pakistan's housing stock remains unavailable, the Pakistan Mortgage Refinance Company (PMRC), in collaboration with Akademos, conducted a comprehensive analysis estimating supply of residential units using GIS-based method on a sample of Pakistan's 13 districts. Extrapolating these findings to a national scale, the estimated total housing stock stood at 36,239,100 units in 2023.

Based on the assumption that each household requires one housing unit, PMRC estimates a total basic housing shortage of 2,101,466 units. Geographically, the most pronounced shortages were observed in highly urbanized districts where the urban population exceeds 80%, as well as in the least urbanized districts with urban populations below 35%. In major urban centers, rapid population growth has outpaced real estate development, resulting in an insufficient supply of housing. Meanwhile, in less urbanized areas, weak real estate markets have struggled to respond to rising urbanization, as these regions lack the critical mass needed to attract substantial real estate investment.

In contrast, moderately urbanized districts, including secondary cities such as Gujranwala and Rawalpindi, have experienced a housing surplus. Strong real estate activity and high urban growth have fueled development, exceeding immediate demand. However, this surplus is believed to be absorbed over time as population growth and land constraints impact future construction.

Housing gap in 13 districts surveyed by PMRC and Akademos:

Beyond the housing gap, the study highlights significant qualitative deficiencies within the existing housing stock. PMRC estimates a broader housing deficit of 15-27 million units, encompassing overcrowded living conditions, substandard housing, and cost-burdened urban households struggling with affordability.

Addressing these challenges requires a coordinated effort from financial institutions, policymakers, and municipal authorities. Among the key measures recommended by PMRC are expanding housing finance, particularly in secondary cities, diversifying financing options, and increasing construction funding. Public-private partnerships should play a key role in driving affordable housing development, supported by regulatory reforms such as the introduction of a Condominium Law and the establishment of a Real Estate Regulatory Authority. Strengthening foreclosure laws and standardizing mortgage documentation will further improve market efficiency, while streamlining zoning regulations and approval processes will enhance the overall investment climate. Additionally, municipal governments must prioritize infrastructure development and slum rehabilitation to improve living conditions, while targeted incentives such as tax reductions and subsidies can encourage urban development and promote homeownership for low- and middle-income households.

Rental Market:

Escalation of Rents Exacerbates Housing Affordability Issue in Urban Areas

The relative size of the rental market in Pakistan has remained stable in recent years. According to the results of the 2023 census published by the PBS, 11.9% of households currently reside in rented dwellings, which is only marginally more than the 11.5% reported during the previous census in 2017. The share of tenants is significantly higher among the urban population (23.8%) than the rural population (4.2%).

The housing situation varies greatly across its provinces and regions, influenced by factors such as population density, affordability, and household size. In Balochistan, the largest province by area, low density and a predominantly rural population make housing more affordable, resulting in the highest homeownership (85.8%) and lowest tenancy (6.2%) rates in the country. In contrast, the highly populated and urbanized Islamabad Capital Territory registers a 36.4% tenancy rate, while only 53.3% of households own their residences. In the provinces of Punjab, Sindh, and Khyber Pakhtunkhwa, the share of tenants varied between 10-16% of resident households.

In nominal terms, based on the latest census data, 4.5 million households across Pakistan are paying tenants, most of those (3.6 million) concentrated in urban centers.

The latest overview of Pakistan's real estate market from Savills estimates the annual rental escalation in Tier-1 cities of Islamabad, Karachi, and Lahore at 10%, noting that though inflation in the country has come down from peak levels registered in 2023, the accumulated impact of sharp inflation over the previous years has resulted in sustained increased rentals.

As of January 2025, the reporting from the property platform Zameen shows the average asking rents per square foot of apartment space at PKR 85 (USD 0.31) in Islamabad, PKR 83 (USD 0.30) in Lahore, and PKR 61 (USD 0.22) in Karachi. For houses, the average asking rent per square foot stood at PKR 126 (USD 0.45) in Islamabad, PKR 80 (USD 0.29) in Lahore, and PKR 75 (USD 0.27) in Karachi.

Corresponding to the elevated rents, gross rental yields for apartments in Pakistan averaged 6.24%, according to the Global Property Guide research conducted in March 2025. Among the monitored regional submarkets, the highest potential performance was recorded in Islamabad (6.75%), followed by Karachi (6.21%), while the average yields observed in Rawalpindi and Lahore were somewhat lower, standing at 6.07% and 5.92%, respectively.

In general, as a recent article in Dawn points out, with surging property prices, the goal of owning a home becomes unattainable for many Pakistani families. The alternative of renting, however, does not resolve the fundamental housing affordability issue. "Renting is more common in other countries, but in Pakistan, it remains an unsustainable solution due to rising rental costs and stagnant wages. As rent continues to consume a lion's portion of household incomes, financial stability remains out of reach for many," says the newspaper.

A recent study on the state of housing affordability in Pakistan from the House Building Finance Corporation (HBFC) found that as of 2024, the national rent burden ratio stood at 14%, with urban areas bearing double the burden of rural regions (19% vs 9%). While rents generally remain below the prevailing interest rates, the combination of low savings capacity and high down payment requirements (30%) creates a rental trap for low-income population groups in urban centers. "The current Tenancy Act warrants reform to specifically protect minimum wage earners rather than its current broad application, as these households face the most severe affordability challenges <…> As urbanization accelerates, these findings underscore the urgent need for tailored interventions. Policymakers must weigh options like incentivized affordable housing development and income-boosting initiatives," said the HBFC report.

Mortgage Market:

Interest Rates Past Peak, Residential Lending Remains Underdeveloped

In June 2024, the State Bank of Pakistan (SBP) cut its target rate for the first time in nearly four years, signaling the start of monetary policy easing. Since then, five further cuts were implemented (most recently in January 2025), bringing the target rate to its current standing of 12%, an incredible 1,000 b.p. drop since June.

In a statement on the latest decision, the SBP noted that the impact of such a significant reduction in recent months is expected to unfold further, supporting economic activity in the country, however, a cautious monetary policy stance is needed to ensure price stability for sustainable economic growth. "In this regard, the [Monetary Policy Committee] assessed that the real policy rate needs to remain adequately positive on a forward-looking basis to stabilize inflation in the target range of 5-7 percent," said the central bank.

In line with rapid monetary policy relaxation, the Karachi Interbank Offered Rate (KIBOR), used as a benchmark rate within Pakistan's banking system and commonly serving as a baseline for specific lending products, including housing loans, also trended downward, 1-Year KIBOR most recently reaching 12.02% at the end of February 2025. The weighted average lending rate of Pakistan's scheduled banks reached 12.59% in January 2025.

Data Source: SBP.

While no official reporting on housing loan rates in Pakistan is available, information on individual credit products advertised by major lenders at the time of research in March 2025 shows that the cost of borrowing remains relatively high in both the traditional and Islamic lending segments. For example, the House Building Finance Corporation (HBFC), a government-owned institution offering housing financing schemes for mid- and low-income population, promoted a scheme with a markup rate of 1-year KIBOR + 3.0-3.5%, and HBL, the country's largest bank, advertised an Islamic home finance scheme with a 14.3% fixed rental rate for the first three years and profit rates of 1-year KIBOR + 3.0-4.2%.

"The high rates in Pakistan indicate perceived higher risks, a less competitive banking sector, and macroeconomic instability. To address this, strategic policy reforms are required to bring Pakistan's mortgage rates in line with those of its more successful Asian peers," stated the HBFC analysis of the housing finance market in 2024.

Local experts see the decreases in interest rates observed in 2024 as not sufficient to significantly affect the availability and accessibility of housing credit to Pakistan's population. The recently formed government task force on housing development named low mortgage penetration by the banks and relatively high interest rates on housing loans among key issues constraining the sector. "It was agreed that policy and banking reforms for introducing low-cost housing subsidies with fixed terms and low policy rates were direly needed. The meeting urged that the policy rate should preferably be in a single digit to support low-income strata and ensure smooth access to housing finance. Moreover, innovative mortgage solutions like incremental housing microfinancing and developing digital financing platforms were also endorsed," Dawn reported on the task force meeting.

Overall, Pakistan's residential lending market remains underdeveloped. According to a study recently published by the Pakistan Mortgage Refinance Company (PMRC), only 6.6% of consumers in Pakistan previously obtained housing finance, and only 16% are interested in obtaining it in the future due to limited loan options, complex application and qualification processes, and high interest rates.

At the same time, private banks in the country are reluctant to finance individual housing projects as mid- and low-income buyers typically lack good credit scores, increasing the risk of non-repayment. The situation is exacerbated by the informal nature of most real estate transactions and the lack of clear property titles in Pakistan. The existing legal framework does not adequately protect lenders in case borrowers default, discouraging the banks from developing new long-term credit products and growing their home loan portfolios.

As of January 2025, according to the SBP reporting, the total value of outstanding personal loans for house building stood at PKR 462.7 billion (USD 1.7 billion), of which more than half (56.8%) was represented by credit taken out by bank employees. Compared to January 2024, the combined stock demonstrated a moderate 2.7% growth; however, this expansion was entirely driven by credit extended to bank employees (which increased by 8.2% year-on-year), while the general consumer segment showed a 3.7% year-on-year drop.

In relative terms, in the last few years, loans for house building grew from 27.5% of total outstanding personal loans in January 2021 to 38.9% in January 2025. At the same time, sized against the national economy, the stock remains very small, estimated to equal only 0.44% of GDP at current prices at the end of FY24 (June 2024).

Data Source: SBP.

Socio-Economic Context:

Return to Growth Supported by IMF Programs, Structural Challenges Remain

The successful completion of the 2023-2024 Stand-By Arrangement (SBA) with the International Monetary Fund (IMF) for about USD 3 billion helped Pakistan to narrow fiscal deficits and rebuild foreign exchange reserves, returning its economy to growth after a 0.2% contraction observed in FY2023. In FY2024, the country's real GDP growth reached 2.4%, supported by the restoration of activity in agriculture. The new government formed after the February 2024 general election continued efforts to strengthen economic conditions and is embarking on a multi-year reform program to achieve resilient growth. The IMF currently projects Pakistan's economic growth to accelerate to 3% in FY2025.

Amid tight fiscal and monetary policies, Consumer Price Index (CPI) inflation in Pakistan has receded significantly, falling from an extraordinary peak of 29.2% in FY 2023 to 23.4% in FY 2024 and single digits in the following months, most recently reported by the PBS at just 1.5% in February 2025. The current inflation projection for the full FY2025 stands at 9.5%.

Aiming to support the country's ongoing reform efforts to address deep structural challenges and restore economic stability, in September 2024, the IMF approved a 37-month Extended Arrangement for Pakistan in the amount of SDR 5,320 million (around USD 7 billion), with the immediate disbursement being about USD 1 billion.

Data Source: IMF.

The overall development of the country is significantly impacted by demographic factors, such as rapid population growth and urbanization. Pakistan's population has tripled in recent decades, growing from about 80 million people in 1980 to over 241 million, as reported by the 2023 Census. Between 2017 and 2023, the urban population (currently making up about 39% of the total) has been increasing by 3.67%, on average, every year, while the rural population's average annual growth rate was notably lower at 1.88%. According to the latest census figures, more than 40% of Pakistan's total population is under 15.

Given the large and growing young population, the prolonged under-investment in social spending, including healthcare and education, undermines the country's vast potential human capital, leaving a significant share of the population unable to integrate into the labor force of a modern economy. The IMF estimates that approximately 35% of Pakistani youth are not in education, employment, or training. The youth unemployment rate is approximately 11%, and the overall unemployment rate in the country is at 8% as of 2024.

Data Source: IMF.

Despite recent progress, deep structural challenges continue to weigh on Pakistan's economic prospects. The poverty rate in the country is estimated by the World Bank at around 40% and is expected to remain at this level in the next two years due to limited growth in real wages and employment. "Pakistani living standards have declined relative to peer [emerging markets and developing economies] in South and South East Asia over the past decades, reflecting weak policies, inadequate investment in human and physical capital, and distortions from an outsized role of the state. At the same time, structural fiscal policy weaknesses and repeated boom-bust cycles have increased external financing needs and depleted buffers, leaving a narrow path to fiscal and external sustainability," said the 2024 Article IV staff report from the IMF.

The outlook for Pakistan's economy in the upcoming periods will largely depend on the successful implementation of structural reforms under the newly secured agreement with the IMF. In July 2024, Fitch Ratings upgraded the country's standing to 'CCC+', citing greater certainty over the availability of external funding after the strong performance of the previous IMF program, as well as ambitious plans by the authorities to tackle long-standing issues of the tax system, energy sector, and state-owned enterprises.

Sources:

1. Pakistan Bureau of Statistics (PBS)
   1. 7th Population and Housing Census - Key Findings Report: https://www.pbs.gov.pk/
   2. Annual National Accounts: https://www.pbs.gov.pk/
   3. Monthly Review on Price Indices, February 2025: https://www.pbs.gov.pk/
2. State Bank of Pakistan (SBP)
   1. Monetary Policy Statements: https://www.sbp.org.pk/
   2. Structure of Interest Rates: https://www.sbp.org.pk/
   3. KIBOR Rates: https://www.sbp.org.pk/
   4. Credit/Loans Classified by Borrowers: https://www.sbp.org.pk/
   5. Governor's Annual Report 2023-2024: https://www.sbp.org.pk/
   6. Bank Floating Average Exchange Rates: https://www.sbp.org.pk/
3. International Monetary Fund (IMF)
   1. Country Overview: Pakistan: https://www.imf.org/
   2. 2024 Article IV Staff Report: https://www.imf.org/
   3. Pakistan: Selected Issues: https://www.imf.org/
   4. IMF Executive Board Completes Second and Final Review of the Stand-By Arrangement for Pakistan: https://www.imf.org/
   5. IMF Executive Board Concludes 2024 Article IV Consultation for Pakistan and Approves 37-month Extended Arrangement: https://www.imf.org/
4. World Bank
   1. Pakistan Overview: https://www.worldbank.org/
5. House Building Finance Corporation (HBFC)
   1. The State of Housing Affordability in Pakistan: https://hbfc.com.pk/
   2. Mortgage Matters: Exploring Housing Finance in Pakistan Along with Asian Countries: https://hbfc.com.pk/
   3. Ghar Sahulat Scheme: https://hbfc.com.pk/
6. Pakistan Mortgage Refinance Company (PMRC)
   1. A Comprehensive Analysis of Pakistan's Housing Market: https://pmrc.com.pk/
7. Habib Bank Limited (HBL)
   1. HBL Islamic Home Finance: https://www.hbl.com/
8. Pakistan Credit Rating Agency (PACRA)
   1. Real Estate Sector Study, June 2024: https://www.pacra.com/
9. Zameen
   1. Property Price Trends and Index by Zameen: https://www.zameen.com/
10. Savills
    1. Pakistan Real-Estate Market Overview 2024: https://research.euro.savills.co.uk/
11. Fitch Ratings
    1. Fitch Upgrades Pakistan to 'CCC+': https://www.fitchratings.com/
12. Bloomberg
    1. Pakistan Cuts Interest Rate For the First Time in Four Years: https://www.bloomberg.com/
13. Dawn
    1. Why Owning a Home is Out of the Question: https://www.dawn.com/
    2. Housing Task Force Seeks Policy, Tax Reforms to Spur Growth: https://www.dawn.com/n
14. Pakistan Today
    1. Govt Task Force Recommends Tax Cuts, Policy Reforms to Boost Housing Sector: https://profit.pakistantoday.com.pk/
    2. World Bank Reports Satisfactory Progress on Pakistan Housing Finance Project: https://profit.pakistantoday.com.pk/
    3. Up to 125% Hike in Rent Ceiling for Federal Employees Proposed:  https://profit.pakistantoday.com.pk/
15. Business Recorder
    1. Affordable Housing Projects: Govt to Announce Major Incentives for Finance Access: https://www.brecorder.com/
16. The News International
    1. How Pakistan Can Fix Its Housing Finance Crisis: https://www.thenews.com.pk/