Pakistan’s Construction Sector Rebounds as Housing Loans Pick Up
KARACHI: Pakistan’s construction industry has turned a corner after a long slump, with builders reporting stronger sales and revived building activity over the past year. The Pakistan construction growth 2026 story is being driven by government-backed housing loans that have finally put buying power in the hands of middle-class families.
Builders say the Prime Minister’s housing scheme, which offers loans of up to Rs10 million on easy instalments, has stimulated the construction industry after years of stagnation. “Most people can’t buy even an apartment since the purchasing price is out of reach of the middle class. The housing scheme has provided liquidity and purchasing has picked up,” said Hassan Bakhshi, chairman of the Association of Builders and Developers (Abad).
Pakistan faces a severe housing shortage, and the cost of construction has risen many times over the past five years. One estimate puts the country’s housing need at 10 million units at a time when 48 per cent of Pakistanis live below the poverty line.
Pakistan construction growth 2026: the numbers
The turnaround shows clearly in official data. Construction growth shot up from negative territory to as high as 19.2 per cent during the six quarters from FY25 to FY26.
The State Bank reported that construction growth was negative 3.3 per cent in the first quarter of FY25. It then rose to 17.6 per cent in the fourth quarter of the same fiscal year. Growth reached 19.2 per cent in the first quarter of FY26, while the first half of the fiscal year recorded 14.6 per cent.
Public Sector Development Programme spending also surged, growing 41.8 per cent in the first half of FY26 compared with a decline of 1.1 per cent in the same period last year. Prices of construction material have fallen considerably, though builders dispute that claim.
Banks cautious on documentation
Despite the momentum, banks remain reluctant to lend without complete documentation. “Banks have not issued loans as much as we were expecting, but they have some real issues,” Bakhshi said. “Banks don’t issue loans unless documentation is complete.”
He explained that many people start building without proper designs or approval from the Sindh Building Control Authority, and banks will not finance such projects. Still, builders say the release of liquidity has let many recover investments stuck in apartments that were never booked because buyers had no money.
Bakhshi expressed hope that the construction industry would soon pick up further, which would in turn energise more than 70 allied industries, from cement and steel to paint and fittings.
Apna Ghar scheme explained
The Prime Minister’s Ghar Ho Tu Apna scheme, launched in September last year, created the demand that set this cycle in motion. The scheme offers subsidised financing at a fixed rate of five per cent, with the markup subsidy paid by the government.
The regulator SECP has also been moving to make housing loans easier, while an earlier real estate revival push laid some of the groundwork for the current upswing.
Another factor is keeping money at home. Builders say the outflow of Pakistani money to Dubai property has declined, as buyers now divert their cash into real estate in Pakistan. Dubai lost some of its appeal with the outbreak of the US-Iran conflict, leaving investors uncertain about liquidity parked there.
Property prices in Karachi’s Defence Society rose by up to 60 per cent as cash-rich buyers turned homeward, though Bakhshi said prices there have corrected by up to 20 per cent over the past month. Prices have risen across almost all Karachi neighbourhoods, which serve as a barometer for the rest of the country. Readers in Islamabad may also recognise the pattern from the dispute over double property tax in G-13 and G-14, another sign of how property markets are heating up.
Who is eligible for the Apna Ghar housing scheme?
The scheme targets middle and lower-middle-income families seeking their first home, with subsidised loans of up to Rs10 million. Full eligibility details were covered in our guide to the scheme.
Why are banks hesitant to give housing loans?
Banks require complete documentation, including approved building plans. Most informal construction projects lack proper designs or approval from building control authorities, so they do not qualify.
How many allied industries does construction support?
Builders say the construction sector supports more than 70 allied industries, including cement, steel, paint, sanitary ware and electrical fittings.
