Dream of own home to get distant as interest rate hits 12%: ABAD

KARACHI (Staff Report): The Association of Builders and Developers (ABAD) Chairman Muhammad Hanif Gohar has warned that Pakistan’s existing shortage of 10 million housing units will worsen after the State Bank of Pakistan’s decision to increase the policy rate by 0.5 percentage points to 12%.

Gohar expressed concern that the hike will make owning a home an increasingly distant dream for ordinary citizens, as rising interest rates will push up the cost of construction and financing.

He said steel bar prices had already increased, and the latest hike could lead to further increases in the prices of cement, steel bars and other construction materials, placing additional pressure on an industry already facing serious challenges.

“The increase in the policy rate could raise the cost of construction projects, as higher interest rates make financing more expensive. This situation could adversely affect investment in construction projects and create difficulties in launching new developments,” he said.

Pakistan is already facing a shortage of 10 million housing units, and ABAD warned that rising construction costs could make it even more expensive for ordinary citizens to build houses and other buildings.

Gohar said the rate hike would not only affect the construction sector but also the national economy and employment opportunities. He noted that more than 100 allied industries linked to construction would struggle to sustain operations if construction activities slow down.

He warned that labourers, skilled workers, contractors and businesses involved in the supply of construction materials would bear the brunt, leading to a significant increase in unemployment.

He called for the increase to be reversed and interest rates to be reduced significantly to improve the economy, stressing that the growth of the construction industry was essential for national economic stability.

He emphasised that the importance of the construction industry must be taken into account when formulating economic policies and urged authorities to address the challenges in a timely manner.