Decoding Housing Affordability in Pakistan: A Comprehensive Guide

The dream of owning a home or securing stable housing is a fundamental aspiration. However, in Pakistan, this dream is increasingly challenged by complex economic realities, making housing affordability a critical issue for millions. Understanding the nuances of this challenge, from average costs to societal impacts, is crucial for both prospective homeowners and policymakers.

What is the Affordability Price?

The “affordability price” isn’t a fixed monetary value; rather, it’s a dynamic benchmark that determines whether a household can comfortably afford housing without compromising other essential living expenses. Globally, the most commonly accepted rule of thumb suggests that housing costs (including rent/mortgage payments, utilities, and maintenance) should not exceed 30% of a household’s gross monthly income.

If a household spends more than this threshold, they are often considered “housing cost-burdened.” For instance, if a family earns PKR 100,000 per month, their housing expenses ideally shouldn’t exceed PKR 30,000 to be considered affordable. This allows them sufficient income for food, healthcare, education, and transportation.

What Does the Average House Cost in Pakistan?

The average cost of a house in Pakistan varies significantly based on location, size, property type, and development status. Major metropolitan areas like Karachi, Lahore, and Islamabad command substantially higher prices compared to smaller cities or rural areas.

As of early 2025, data indicates the following general trends:

• Karachi: The average house price in Karachi was reported around PKR 6.98 Crore in April 2025, with prices per square foot for houses around PKR 21,500 (USD 77) in January 2025. Prices in prime areas like DHA Defence can be significantly higher.
• Islamabad: House prices in Islamabad were among the highest, averaging PKR 30,140 (USD 108) per square foot for houses in January 2025.
• Lahore: Houses in Lahore averaged PKR 21,850 (USD 78) per square foot in January 2025.

For apartments, the average price per square foot in January 2025 was around PKR 15,200 (USD 55) in Karachi, PKR 15,150 (USD 54) in Islamabad, and PKR 15,870 (USD 57) in Lahore. These figures highlight the substantial investment required for property ownership in Pakistan’s major urban centers, often placing it out of reach for a large segment of the population.

What is the Housing Condition in Pakistan?

Pakistan faces a severe housing deficit, estimated to be over 10 million units and continuously widening due to rapid population growth and urbanization. The housing conditions are characterized by several pressing issues:

• Shortage of Adequate Housing: There’s a significant gap between demand and supply, particularly for low- and middle-income groups.
• Prevalence of Informal Settlements: A large portion of the urban population lives in “katchi abadis” (informal settlements or slums) due to a lack of affordable formal housing options. These areas often lack basic amenities, proper infrastructure (water supply, sanitation, electricity), and secure land tenure.
• Substandard Living Conditions: Even in formal sectors, many existing housing units may be old, poorly maintained, or lack modern amenities, contributing to health and safety concerns.
• Lack of Infrastructure: Even where housing units exist, the absence of essential infrastructure (roads, clean water, sewerage systems, gas, electricity) makes them less habitable, especially in peri-urban and rural areas.
• Unaffordable Land and Construction Costs: Skyrocketing land prices, combined with rising material and labor costs, inflate construction expenses, pushing housing out of reach for many.
• Limited Access to Financing: The majority of low-income families struggle to access formal housing finance due to stringent eligibility criteria, high interest rates, and a lack of collateral.

Who is Most Affected by Housing Affordability?

The housing affordability crisis disproportionately impacts several segments of Pakistan’s population:

• Low- and Middle-Income Households: These groups often find their incomes insufficient to meet the rising costs of housing, whether renting or purchasing. They are the primary demographic struggling to secure safe, decent, and affordable shelter.
• Marginalized Communities: Vulnerable groups, including daily wage earners, informal sector workers, and those without stable employment, are severely affected. They often face the stark choice between spending an excessive portion of their income on rent or residing in unserviced informal settlements.
• Urban Migrants: The continuous influx of people from rural to urban areas in search of economic opportunities exacerbates the urban housing crisis. These migrants often end up in overcrowded and informal living conditions.
• Women and Children: Within cost-burdened households or informal settlements, women and children are particularly vulnerable to health risks, insecurity, and limited access to education and social services due to poor living conditions.
• First-Time Homebuyers: Young couples and individuals looking to enter the housing market for the first time face immense challenges due to high upfront costs, down payment requirements, and mortgage unaffordability.

How is Affordability Calculated?

Housing affordability is typically calculated using several metrics, with the most common being:

1. Price-to-Income Ratio (or Shelter Cost-to-Income Ratio): This is the most prevalent method. It compares the median housing cost (whether rental or mortgage payment plus utilities) to the median household income. As mentioned, the 30% threshold is widely used: Housing Affordability=Gross Monthly Household IncomeMonthly Housing Costs​×100% If this percentage is 30% or less, housing is generally considered affordable. If it exceeds 30%, the household is considered cost-burdened, and if it’s over 50%, they are severely cost-burdened.
2. Median Multiple (Price-to-Income Ratio for Ownership): This ratio compares the median house price to the median annual household income. For instance, if the median house price is PKR 10 million and the median annual household income is PKR 2 million, the median multiple is 5. A higher multiple indicates lower affordability. A multiple of 3.0 or less is generally considered affordable.
3. Residual Income Method: This approach calculates the income a household has left after paying for housing costs and other essential non-housing expenses (like food, transportation, healthcare). If the residual income is insufficient to cover these basic needs, housing is deemed unaffordable, regardless of the percentage spent on housing alone.

These calculations help policymakers and researchers gauge the extent of the housing crisis and identify the groups most in need of interventions.

What is the Concept of Affordability?

The concept of affordability in housing extends beyond just a simple financial calculation. It encompasses the ability of a household to secure housing that is:

• Financially Sustainable: The cost of housing should not unduly burden a household‘s budget, allowing them to meet other basic needs and potentially save for the future.
• Adequate in Quality: The housing unit should be safe, structurally sound, and provide protection from the elements, with access to basic amenities like clean water, sanitation, and electricity.
• Appropriate in Size: The dwelling should offer sufficient space for the household members, avoiding overcrowding.
• Well-Located: It should provide reasonable access to employment centers, educational institutions, healthcare facilities, and public transportation, minimizing commuting costs and time.
• Secure: Residents should have secure tenure, whether through ownership or a stable rental agreement, protecting them from arbitrary eviction.

In essence, housing affordability is about ensuring that every individual and family has the opportunity to live in a decent home, in a suitable location, without sacrificing other fundamental necessities, thereby contributing to their overall well-being and productivity within society. In Pakistan, achieving true housing affordability requires concerted efforts addressing economic, social, and policy-level challenges.