Pakistani Real Estate Industry: A Case Study of the Housing Market in Karachi, Pakistan

February 28, 2022

The real estate market in Pakistan is a developing industry with large gaps between supply and demand. This paper examines how these gaps are created, what drives their existence, and how they can be filled. The study takes place in Karachi, Pakistan’s largest city and capital of Sindh province. 

Karachi has been an important center for trade since its inception as a port city in 1747. It currently hosts more than three million people (approximately 10 percent of Pakistan’s population) and is expected to reach a population of 15 million by 2025. Karachi also is home to approximately one third of Pakistan’s manufacturing and export industries, including textiles, clothing, leather goods, pharmaceuticals, chemicals, food processing, and automotive components. In addition, it hosts nearly half of Pakistan’s stock exchange listings. Karachi is considered the commercial hub of southern Asia, rivaling Mumbai in India or Shanghai in China. 

The Karachi housing market reflects the city’s growth and dynamism. Since the early 2000s, the number of new homes built each year has increased dramatically. However, the number of people moving into Karachi has not kept up with this increase. More than 90 percent of Karachi’s residents still live in modest neighborhoods on the outskirts of the city. These areas lack basic infrastructure such as hospitals, schools, and public transportation.  

As a result, many families are forced to move to the city every few years because there is no room for them in their current neighborhood. The high cost of land in Karachi leads property developers to build large homes that are too expensive for the average family. Most of these homes do not serve the needs of low-income buyers. The poor cannot afford to buy a house in Karachi, and the middle class cannot find houses that meet their budget. As a result, most new homes go unsold. 

In order to create affordable housing, the real estate industry must first understand why some developments fail while others succeed. The paper addresses two questions regarding this issue. First, what factors cause the failure of a development? Second, which factors lead to success? 

To answer the first question, we studied the reasons behind the failure of several developments in Karachi during the 2000s. Our research found that four main factors led to project failure: insufficient funding, political instability, inadequate infrastructure, and poor location. For example, projects were often delayed because of political turmoil in the country; developers lacked adequate funds to complete construction; roads leading to the site were not paved and water pipes did not exist. 

Second, we examined successful housing developments to identify the factors that contributed to their success. We discovered that successful projects had five common characteristics: good location, accessible financing, well-planned infrastructure, skilled labor, and strong marketing. Developers who incorporated these factors were able to fill the gap between supply and demand in the housing market. 

We conclude this paper with recommendations for creating a sustainable housing sector in Karachi. First, the government should provide financial assistance and tax incentives for developers willing to build affordable housing. They should also develop better infrastructure to ensure that all parts of the city have access to clean water, electricity, and healthcare facilities. 

Finally, the government should sponsor campaigns to educate the public about the benefits of owning a home instead of renting. The government could also promote local industries by purchasing products made in Pakistan, thereby encouraging foreign companies to open factories in the country. 

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