Soaring Property Prices in Pakistan’s Housing Societies Raise Concern

In recent months, the real estate market in Pakistan has experienced an unprecedented surge in housing society prices. From metropolitan cities like Karachi, Lahore, Islamabad, to growing urban hubs such as Multan and Faisalabad, property rates have climbed at a rapid pace. This article explores the key causes, impacts, and future outlook of this sharp rise in housing costs.

🔹 Construction Costs on the Rise

One of the primary reasons behind this price hike is the increased cost of construction. Inflation, higher energy prices, and the weakening of the Pakistani Rupee have made construction materials like steel, cement, and bricks significantly more expensive.
According to the State Bank of Pakistan, construction loans rose to PKR 246 billion in the first quarter of 2025, compared to PKR 211 billion during the same period last year. This indicates that both developers and buyers are now facing greater financial pressure when acquiring or building property.

🔹 Real Estate as a Safe Investment

With the continuous devaluation of the Rupee and high inflation, many people now consider real estate to be a safe and profitable investment.
As one Reddit user pointed out:

“Hyperinflation causes money to lose value. People don’t like having cash lying around, so they buy plots or cars.”
Another noted:
“The MAIN reason for the price surge is that people have invested in property and cars. Everyone with some savings either bought land or vehicles, driving prices up.”
This kind of investment behavior has led to speculative buying, pushing property rates far beyond the reach of average earners.

🔹 Impact of Government Policies

Several government policies have also contributed to the spike in housing prices:

🔹Increase in Property Valuation Rates

The federal government revised market valuation rates for properties, especially in major cities, resulting in higher taxes and a rise in transaction costs.

Capital Gains Tax and Withholding Tax
Property sellers are now subject to a 15% Capital Gains Tax, while non-filers may pay as much as 45%, discouraging frequent buying and selling of plots.

Inadequate Affordable Housing Initiatives
Although the government has launched low-cost housing schemes and offered subsidies, the execution has been slow, limiting their immediate impact on the market.

🔹 Demand-Supply Gap

There remains a major disconnect between housing demand and supply in Pakistan.

The housing shortfall in urban areas exceeds 2.1 million units.

Poor urban planning and lack of low-cost housing options have forced lower and middle-income families to look for housing far from city centers, adding to their daily commuting costs.

🔹 Boom in Gated Societies

High-end housing societies such as DHA, Bahria Town, and other private developers continue to see rising prices.
A user on Reddit commented:

“Intermediate societies have crashed. DHA is for elites, so their market is unaffected.”
This shows how the price increase is largely limited to high-income neighborhoods, while mid-tier and low-cost projects struggle to survive.

🔹 Economic Factors and Foreign Remittances

Stabilization in Pakistan’s macroeconomic indicators and an increase in remittances from overseas Pakistanis have injected fresh liquidity into the real estate sector.
As one report from The Express Tribune stated:

“With declining interest rates from banks, investors now see property as a safer and more lucrative alternative for wealth preservation.”

🔹 Impact on Lower and Middle-Class Citizens

Housing Affordability at Risk

Blue-collar workers, small business owners, and salaried individuals are increasingly being priced out of urban areas.

Rental Prices on the Rise
In Karachi and Lahore, annual property price appreciation is reported around 10%, and rental returns in Islamabad have risen above 6%.

Shrinking Options for Middle Class
One user on Reddit observed:

“People are now investing in leaving the country… When the economy tanked, people stopped trusting property and moved their money into savings accounts due to high interest rates.”

✅ Way Forward and Possible Solutions

To stabilize the housing market, the following steps are crucial:

Accelerate Low-Cost Housing Projects
The government must implement and expand affordable housing initiatives through public-private partnerships.

Tax Reforms and Transparency
Streamlining the property tax framework and digitizing land ownership records can enhance transparency in real estate dealings and help curb fraudulent practices.

Strict Regulation on Housing Societies
Enforcing rules against illegal housing projects and unauthorized land use is necessary to create balance in property supply and demand.

Conclusion

The recent surge in housing society prices in Pakistan is fueled by a combination of rising construction costs, investor behavior, economic instability, and flawed government policies. While real estate may seem like a safe haven for wealth preservation, its current trajectory is pricing out the very people who need homes the most.

To ensure equitable access to housing and restore market balance, strong regulatory policies, tax reforms, and effective affordable housing programs must be prioritized. Without such measures, the dream of owning a home may remain out of reach for millions of Pakistanis.