No place to call home?

LAHORE: In Pakistan, where construction is not mechanized, the construction sector plays a pivotal role in employment creation. Manual labour is heavily utilized, ranging from unskilled to semi-skilled and skilled workers.

The sector is labour-intensive, providing jobs for masons, carpenters, electricians, plumbers, and general labourers. Pakistan faces a severe housing shortage, particularly for low- and middle-income groups.

The estimated housing shortfall is around 10-12 million units, with approximately 300,000-400,000 new housing units required annually. However, only about 150,000-200,000 units are built each year, leading to a growing gap.

The shortage is particularly acute in urban areas, where rapid population growth, urbanization and insufficient housing policies have exacerbated the issue, resulting in informal settlements and overcrowding.

The construction sector in Pakistan provides direct employment to workers such as site managers, architects and engineers. It also plays a crucial role in providing indirect employment through suppliers of materials (including cement, bricks, steel, paints, cables, sanitary items, bulbs, tubes, fans, air conditioners, etc), transporters, and auxiliary services.

A decline in the construction industry significantly impacts industries closely tied to it. For example, manufacturers of cement, steel, wood, bricks, glass and paint experience reduced demand, which can lead to potential layoffs and closures.

A decline in construction reduces demand for equipment, affecting suppliers of machinery and tools. Transport and logistics also face reduced activity due to decreased demand for the movement of construction materials.

During a recession or when input costs rise, both new construction and repair/maintenance activities can decline. New construction is typically hit harder as consumers and businesses delay large capital expenditures. Repair and maintenance activities may also decline, though to a lesser extent compared to new builds. People often postpone non-essential maintenance, but critical repairs (such as roof leaks and plumbing issues) still need to be addressed. However, high input costs can lead to cost-cutting in quality and frequency.

On average, repair and maintenance activities account for 10-20 per cent of total construction output in various economies. In more mature economies with aging infrastructure, this percentage can be higher.

Due to low average incomes, it is almost impossible for lower-income families to afford a house through instalments. For poor families, the ideal monthly instalment should be based on their monthly income. A generally accepted guideline is that housing costs should not exceed 25-30 per cent of monthly household income to ensure affordability.

For example, if a poor family earns Rs50,000 per month, their monthly instalment should ideally be around Rs12,500. This balance allows families to cover other essential expenses, such as food, utilities and healthcare, without becoming overburdened by housing costs.

Government subsidies or interest rate reductions may be necessary to achieve these affordable rates. Unfortunately, this ideal instalment is often too low to be commercially viable for home developers. This is why the government sporadically attempts to build a few houses for the poor, while the private sector typically targets high-end consumers.

Globally, the average number of people per household varies but generally ranges from two to six people, depending on the region. In high-income countries, the average is around 2-3 people per house due to smaller family sizes.

In Pakistan, the average household size is around six people. Based on this figure, the country needs approximately 40 million houses. Given the existing shortage and the growing population, Pakistan will need to significantly increase housing production to meet this demand.