Housing plays a key socio-economic role and represents the most significant asset that lower-income groups have in most developing countries. According to a 2019 report, the country is facing a shortage of 9 million residential houses. The government of Pakistan Tehreek-e-Insaf (PTI) deserves appreciation for taking concrete steps to solve the housing crisis in Pakistan. The incentive package is the first step in the provision of houses on affordable rates to the people. In this regard, the government’s announcement of an incentive package on Friday will encourage the developers and investors to pour in their resources and wealth in the construction sector.

Moreover, while announcing the construction package, the PM touched upon an important facet that is missing from our economic system, i.e., housing finance. He hinted on introducing it as a supplementary to the construction package. Housing finance development plays a role in boosting equitable economic growth and reducing poverty. It does so through helping households build assets, improving living conditions, empowering the middle- and lower-income population, and strengthening communities. Despite its considerable economic and social potential, housing finance remains underdeveloped in Pakistan.

Unfortunately, the banking sector in the country never warmed up to this idea despite the fact it is highly profitable. Because of some inherent issues, banks and financial institutions are not focusing much on this sector. The government needs to remove all unnecessary obstacles before asking the banks to introduce housing finance. Removing these hurdles will not only kickstart this industry, but it will also benefit other sectors such as cement, paint and steel. The banks do not see house financing as a reliable investment. This is where the State Bank needs to step in. Looking at other countries’ financing options that provide guarantees installed to ensure return on investment (ROI), the State Bank can also create such a framework to encourage banks.