Home ownership is declining in Pakistan
Current level of home ownership in Pakistan is approximately 75%. The level of home affordability in Pakistan is declining day by day and it’s becoming hard for a common person to afford a decent home. Home ownership level increases when housing is affordable and decrease when housing is unaffordable. Lets see the home affordability level of common Pakistanis.
Formula to calculate home affordability
Worldwide a single formula is applied to calculate the home affordability level of a single person or a family. It’s the ratio between average annual national salary and average national house price. A house worth 4 times the average salary is considered to be affordable.
In case of Pakistan, it’s hard to calculate average house price as houses are very big as compared to the rest of the world. But we consider a 3 Marla house (built area 1350 sq ft) for this comparison as world average house size is about 1300 sq ft. 3 Marla average house price in Pakistan is approximately 5 million PAK Rupees or $50,000. Whereas, average annual salary in Pakistan is about 25,000 rupees per month and .3 million rupees or 3000 dollars per year. By above formula, a house of price 1.2 million rupees or 12000 dollars is affordable in Pakistan.
As average 3 Marla house price is 5 million rupees, a person on average salary cannot afford it. Whereas reasonable house for Pakistanis is between 5 Marla to 20 Marla (Marla land = 225 sq ft). This clearly shows that housing is highly unaffordable in Pakistan.
Reasons of unaffordable housing market of Pakistan
High inflation:
Inflation is the first major reason of unaffordable housing in Pakistan. To cover debts, Pakistani government is printing more currency, which is devaluing our PAK Rupee and price of everything is increasing. Construction cost is increasing day by day due to high inflation. This is ultimately resulting in high house price.
High population growth:
Pakistan’s current population is 200 million and is increasing day by day. Currently 50% of housing stock is 30 years old and need to be replaced by modern houses. Pakistan is facing shortfall of 10 million houses. Limited housing stock vs high demand is resulting in high house price.
Pakistan housing societies are just developed for overseas people:
10 million Pakistanis are living and working abroad due to better job opportunities. Many of them have families in Pakistan and want to build their home in Pakistan. As they have more money to buy land or houses, a common Pakistani is forced out of the market.
Increasing home affordability in Pakistan:
Many steps can be taken to increase house affordability in Pakistan. Here is the list of the followings:
1) Housing should be given the status of industry in Pakistan and government should subsidies the builders to develop cheap and affordable housings
2) New housing schemes or developments should provide 15-20% affordable houses for the poor people
3) Average salary should be increased in Pakistan
4) Land should be provided free of cost to the poor people to build own homes
5) Government should provide cheap loans to the people who have land and want to build their own homes
6) All construction materials should be tax exempted. This will result in reducing the construction cost