Abstract
Karachi is the largest city of Pakistan amongst the mega metropolitan of the world. Since the independence of Pakistan, in 1947, the city has undergrown massive surge in population largely contributed by migration and urbanization. The amount of housing units present in Karachi is insufficient for the ever-growing population of the city and the housing units present are unaffordable to most of the public, especially the bottom 20% of the income group. The purpose of this study is to analyze the factors that contribute to the variation of local construction costs which in turn affect the affordability of housing units present in Karachi, evaluate affordability and mortgage repayment ability of different income groups present in the city and lastly, forecast housing demand for the city. To fulfill the objectives of this study, secondary data from House Building Finance Corporation (HBFC), Pakistan Bureau of Statistics (PBS), Household Integrated Economic Survey of Pakistan (HIES) was collected, and primary data was also collected from local construction contractors and house builders in Karachi. This data was used to determine construction rates in different localities of Karachi which is shown in the table below. The ARIMA methodology was used to find the future demand of housing in Karachi, as shown in the figure, and House Price to Income Ratio, Mortgage to Income Ratio and Residual Income Approach was used for the analysis of affordability. Housing demand was forecasted for the years 2017–2020 which clearly shows that the housing demand is increasing with respect to time, and the Mean Absolute Percentage Error (MAPE) was 2.07%. The analysis of affordability and mortgage repayment shows that the bottom 20% of income earners cannot afford a house or pay off their mortgages.
Construction rates in different towns of Karachi
Area | Rates |
---|---|
D. H. A | 2200/ft2 |
Gulistan-e-Johar | 1300/ft2 |
Gulshan-e-Iqbal, North Karachi & Safoora Goth | 1600/ft2 |
Malir, Shah Faisal, Korangi, Landhi | 1250/ft2 |

Trend line of original and forecasting housing demand
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
References
Ahmed, A. (2015). Housing demand in urban areas of Pakistan. Department Of Economics Pakistan Institute of Development Economics, Islamabad, Pakistan Research Repository.
Ahmed, A. (2022). Evaluation of Naya Pakistan housing. In F. Zulfiqar (Ed.), Evaluations of regulatory authorities, government packages, and policies (p. 43). Pakistan Institute of Development Economics.
Ali, A. (2008). The impact of financial crisis on Pakistani economy. Strategic Studies, 28, 106–117.
Al-Marwani, H. A. (2014). An approach to modeling and forecasting real estate residential property market. Doctoral dissertation.
Aziz, T. (2021). Changes in land use and ecosystem services values in Pakistan, 1950–2050. Environmental Development, 37, 100576.
Baig, M. S. R., Nawaz, H. M. U., & Idrees, R. Q. (2020). Housing for all: A case study of Kachi Abbadis (slums) in achieving the goal of housing for all in Pakistan. Orient Research Journal of Social Sciences, 5, 32–44.
Basit, M., Sajjad, S. H., Khan, M. I., Ali, A., & Kurshid, S. K. (2018). Spatio-temporal trends of urban population in Pakistan. Asian Journal of Multidisciplinary Studies, 6(8), 21–26.
Beaver, W., & Morse, D. (1978). What determines price-earnings ratios? Financial Analysts Journal, 34(4), 65–76.
Chang, Y. W., & Liao, M. Y. (2010). A seasonal ARIMA model of tourism forecasting: The case of Taiwan. Asia Pacific Journal of Tourism Research, 15(2), 215–221.
Clayton, J. (2009). Thinking spatially: towards an everyday understanding of inter-ethnic relations. Social & cultural geography, 10(4), 481–498.
Collinson, R., Ellen, I. G., & Ludwig, J. (2015). Low-income housing policy. In Economics of means-tested transfer programs in the United States (Vol. 2, pp. 59–126). University of Chicago Press.
Daud, N. M., Nor, N. M., Ali, U. N., Yusof, M. A., & Munikanan, V. (2017). Affordable housing system: A review on issue of housing affordability. The Social Sciences, 12(7), 1281–1287.
De Risi, R., De Paola, F., Turpie, J., & Kroeger, T. (2018). Life Cycle Cost and Return on Investment as complementary decision variables for urban flood risk management in developing countries. International Journal of Disaster Risk Reduction, 28, 88–106.
Fattah, J., Ezzine, L., Aman, Z., El Moussami, H., & Lachhab, A. (2018). Forecasting of demand using ARIMA model. International Journal of Engineering Business Management, 10, 1847979018808673.
Freybote, J. (2019). Real estate markets in Pakistan. In Real Estate in South Asia (pp. 277–290). Routledge.
Gan, Q., & Hill, R. J. (2009). Measuring housing affordability: Looking beyond the median. Journal of Housing Economics, 18(2), 115–125.
Hanif, F., Shamshir, M., & Alwi, K. K. (2020). House finance for low income groups in Pakistan. Independent Journal of Management & Production, 11(4), 1394–1418.
Hashmi, S., Safdar, N. F., Zaheer, S., & Shafique, K. (2021). Association between dietary diversity and food insecurity in urban households: A cross-sectional survey of various ethnic populations of Karachi, Pakistan. Risk Management and Healthcare Policy, 14, 3025–3035.
Hulchanski, J. D. (1995). The concept of housing affordability: Six contemporary uses of the housing expenditure-to-income ratio. Housing Studies, 10(4), 471–491.
Januschowski, T., Gasthaus, J., Wang, Y., Salinas, D., Flunkert, V., Bohlke-Schneider, M., & Callot, L. (2020). Criteria for classifying forecasting methods. International Journal of Forecasting, 36(1), 167–177.
Javed, N., & Sani-e-Zahra Naqvi, S. (2022). Affordable housing in Pakistan: The policy and institutional imperatives. In A. Kundu, T. P. Dentinho, H. Magsi, K. Basu, & S. Bandyopadhyay (Eds.), Accessible housing for South Asia: Needs, implementation and impacts (pp. 225–242). Springer.
Kam, K. M. (2014). Stationary and non-stationary time series prediction using state space model and pattern-based approach. The University of Texas at Arlington.
Khadduri, J., & Wilkins, C. (2008). Designing subsidized rental housing programs: What have we learned? In N. P. Retsinas & E. S. Belsky (Eds.), Revisiting rental housing: Policies, programs, and priorities (pp. 161–190). Brookings Institution Press.
Kramna, E. (2014). Key input factors for discounted cash flow valuations. WSEAS Transactions on Business and Economics, 11, 454–464.
Kutty, N. K. (2005). A new measure of housing affordability: Estimates and analytical results. Housing Policy Debate, 16(1), 113–142.
Malik, S., Roosli, R., & Tariq, F. (2020). Investigation of informal housing challenges and issues: experiences from slum and squatter of Lahore. Journal of Housing and the Built Environment, 35(1), 143–170.
Malik, S., Roosli, R., Tariq, F., & Yusof, N. A. (2020). Policy framework and institutional arrangements: Case of affordable housing delivery for low-income groups in Punjab. Pakistan. Housing Policy Debate, 30(2), 243–268.
Melese, M. (2004). City expansion, squatter settlements and policy implications in Addis Ababa: The case of Kolfe Keranio sub-city. Ethiopian Journal of the Social Sciences and Humanities, 2(2), 50–79.
Nassif, A. B., Soudan, B., Azzeh, M., Attilli, I., & AlMulla, O. (2021). Artificial intelligence and statistical techniques in short-term load forecasting: a review. arXiv preprint arXiv:2201.00437.
Ong, C. S., Huang, J. J., & Tzeng, G. H. (2005). Model identification of ARIMA family using genetic algorithms. Applied Mathematics and Computation, 164(3), 885–912.
Pagourtzi, E., Assimakopoulos, V., Hatzichristos, T., & French, N. (2003). Real estate appraisal: a review of valuation methods. Journal of Property Investment & Finance, 21(4), 383–401.
Pogge, T. (2010). World poverty. In J. Skorupski (Ed.), The Routledge companion to ethics (pp. 796–807). Routledge.
Rhea, S., Wang, E., Wong, E., Atkins, E., & Storer, N. (2017, May). Littletable: A time-series database and its uses. In Proceedings of the 2017 ACM international conference on management of data (pp. 125–138).
Rizvi, M. A. (2019). The ethics of staying: Social movements and land rights politics in Pakistan. Stanford University Press.
Saavedra, J., & Chong, A. (1999). Structural reform, institutions and earnings: evidence from the formal and informal sectors in urban Peru. The Journal of Development Studies, 35(4), 95–116.
Samuel, P., & Nisar, S. (2021). Stuck in slums: A case study of slums in Islamabad Pakistan. European Scientific Journal, 17(2), 56–78.
Sathar, Z. A. (2012). Pakistan’s population prospects, 2010–2030: A glass half full or half empty? In H. Groth & A. Sousa-Poza (Eds.), Population dynamics in Muslim countries: Assembling the jigsaw (pp. 79–95). Springer.
Shumway, R. H., Stoffer, D. S., & Stoffer, D. S. (2000). Time series analysis and its applications (Vol. 3, p. 4). New York: springer.
Soomro, F. A., Memon, M. J., Chandio, A. F., Sohu, S., & Soomro, R. (2019). Causes of time overrun in construction of building projects in Pakistan. Engineering, Technology & Applied Science Research, 9(1), 3762–3764.
Stone, P. R. (2006). A dark tourism spectrum: Towards a typology of death and macabre related tourist sites, attractions and exhibitions. Tourism: An International Interdisciplinary Journal, 54(2), 145–160.
Tariq, F., Salman, M., Hasan, J., Zafar, Z., Malik, S., Nawaz, M., Gul, A., & Sheikh, N. B. (2018). Appraisal of national housing policy—A case of Pakistan. Technical Journal, 23(03), 1–8.
Tirmizi, M. A. (2007). Sustainable urban development strategies for the provision of low-income housing in Pakistan. In CESB 07 PRAGUE conference.
Ullah, A. (2016). Prospects of smart cities development in India through public private partnership. International Journal of Research in Advent Technology, 4(1).
Umair, M., & Naz, L. (2019). The index value trend analysis of rural-urban migration in Pakistan: The current and future perspectives. Pakistan Journal of Social Sciences, 39(3), 979–993.
Van Der Gaag, M., & Snijders, T. A. (2005). The resource generator: Social capital quantification with concrete items. Social Networks, 27(1), 1–29.
Whittle, P. (1953). Estimation and information in stationary time series. Arkiv för matematik, 2(5), 423–434.
Zulkifi, Z., & Bujang, A. A. (2008). Housing affordability: A study on household expenditures ratio on the income for the lower and middle.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2024 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this paper
Cite this paper
Khan, R.A., Gazder, U. (2024). Housing Demand, Affordability and Mortgage Financing: A Case Study of Karachi. In: Mansour, N., Bujosa Vadell, L.M. (eds) Sustainability and Financial Services in the Digital Age. EUROCRYPT 1988. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-67511-9_16
Download citation
DOI: https://doi.org/10.1007/978-3-031-67511-9_16
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-031-67510-2
Online ISBN: 978-3-031-67511-9
eBook Packages: Business and ManagementBusiness and Management (R0)