Ayesha Saba

Pakistan’s real estate sector continues to face significant constraints due to systemic inefficiencies in property leasing and mortgage financing, limiting its growth potential in the absence of comprehensive reforms. Experts underscore the urgent need to modernise regulatory frameworks and enhance access to financing to support sustainable, long-term development.

Talking to WealthPK, Ali Raza, a property law specialist, said the property leasing system in Pakistan is plagued by outdated legal frameworks and complicated processes. “For instance, many real estate transactions require cumbersome documentation and have unclear regulations, leading to prolonged delays.” He said that these inefficiencies discourage foreign investment and make it difficult for local buyers to enter the market.

“In the case of mortgage financing, the challenges are equally significant. Pakistan’s mortgage system is underdeveloped, with low levels of financial inclusion, especially among the lower-income segments of the population,” he noted. Raza highlighted that the formal mortgage market is largely inaccessible due to high interest rates and stringent eligibility requirements.

“Pakistan’s low homeownership rate reflects this problem, as many people cannot afford the down payment or meet the strict requirements of financial institutions. As a result, a large proportion of the population is unable to access credit for purchasing property, even though demand for housing continues to rise. This has led to a significant gap in the housing market, with a severe shortage of affordable homes,” he explained.

Meanwhile, talking to WealthPK, Khaliq Ahmed, former investment adviser at Meezan Bank, pointed out that Pakistan’s banking sector has been slow to innovate in providing affordable mortgage products. He argued that the absence of long-term financing options and lower mortgage rates further limit the accessibility of home loans. “The real estate market is facing liquidity challenges, as banks have become more risk-averse amid economic uncertainties.

Banks often require substantial collateral and have rigorous eligibility requirements, making it difficult for many potential homeowners to qualify for a mortgage,” he noted. Ahmed said that addressing these challenges requires a multi-faceted approach. “Reforming legal frameworks related to property leasing and standardising agreements could mitigate the risks associated with real estate transactions.”

Additionally, he said improving access to affordable mortgage financing through policy reforms, such as offering lower interest rates and extending repayment periods, would enable more individuals to enter the housing market. “Furthermore, developing a transparent property valuation system and introducing more reliable market data would help stabilise the market and attract greater investment,” Ahmed suggested.

Credit: INP-WealthPk