Commercial banks have reported a weak response to the government’s recently relaunched housing finance scheme, citing a mismatch between the maximum loan size on offer and prevailing property prices, particularly in major cities.
According to a news report, to address Pakistan’s growing housing shortage, the government allocated a subsidy of Rs5 billion for the current fiscal year, following which the State Bank of Pakistan (SBP) introduced a subsidised housing finance scheme. The scheme allows financing of up to Rs3.5 million for the purchase of houses and plots, as well as for construction and renovation.Â
However, market participants say the cap is well below actual housing prices in cities such as Karachi, Lahore, and Islamabad, limiting its appeal to prospective buyers.
Banking, real estate, and construction sector experts said that even small apartments in large urban centres are priced significantly higher than the scheme’s ceiling, resulting in low uptake and undermining the programme’s objective of promoting home ownership and stimulating construction activity.
Industry stakeholders have urged the government and the central bank to revisit the scheme’s structure and align financing limits with market realities, particularly for middle-income households. They have also called for broader reforms to revive the construction sector, which supports employment and several allied industries.
According to the World Population Review, Pakistan’s housing affordability index has declined to 0.4 from 0.5, reflecting reduced affordability amid rising property prices, higher borrowing costs, and a persistent housing shortage. The index places Pakistan below regional peers, with Bangladesh at 0.7 and India at 0.8.
Market participants argue that without a substantial increase in the financing limit, the scheme is unlikely to gain traction. They point to the earlier subsidised housing finance programme launched in October 2020, under which banks received applications worth Rs514 billion within 18 months. That scheme allowed loans of up to Rs10 million at subsidised markup rates with repayment tenures of up to 20 years, and was credited with boosting construction activity and formal mortgage penetration.
The earlier programme was discontinued due to fiscal constraints and rising policy rates. When the current government revived the initiative in September 2025, it did so with a significantly lower loan cap, which analysts say has reduced its effectiveness in addressing Pakistan’s expanding housing deficit.
