In Pakistan, average monthly expenditure on rent per household has increased at an annual rate of over 13% for the last nine years, according to the Pakistan Bureau of Statistics (PBS).
A look at the Household Integrated Economic Survey (HIES) released by the PBS reveals that an average Pakistani family spent Rs888 every month on house rent in 2001-02; which rose to Rs2,693 in 2010-11; signifying an annualised increase of 13.12% over a period of nine years.
Interestingly, in the same period, annual rise in average house rent in rural areas was 2.7% higher than the corresponding increase in urban areas – even though 85.63% of the populace of rural areas lives in owner-occupied houses. In contrast, 75.79% of the urban population lives in houses that they own.
The highest number of people living in rented houses in urban areas belongs to the third quintile of the population in terms of income distribution at 22.38%. The third quintile in income distribution is representative of the middle class in a society.
The lowest number of people living in rented houses in urban areas – 15.93% – belongs to the fifth quintile of the income distribution. This suggests that the richest people in urban areas are most likely to own the house they live in.
The HIES figures also reveal that the poorest people, belonging to the first quintile in urban areas, end up spending 83% more on house rent as compared to a comparable group living in rural areas. Similarly, the richest people belonging to the fifth quintile living in urban areas tend to spend 220% more on average house rent per household, as compared to a comparable segment of the population living in rural areas.
Home ownership and per-capita incomes
“Rise in per-capita income does not seem to display any correlation with the percentage of owner-occupied houses in Pakistan,” economist Kaiser Bengali said, while talking to The Express Tribune. “In many cases, someone who works as a peon and earns a low monthly income can still own a house in Pakistan. This is so because people belonging to certain professions – such as the civil service, military, police, government teachers, journalists etc – receive free or subsidised land from the government or other trusts.”
Data supports Bengali’s view. Pakistan’s Gross National Income (GNI) per capita, formerly known as the Gross National Product per capita, increased by 9.62% annually between 2002 and 2011; but the number of persons living in owner-occupied houses over the same period remained almost stagnant at around 79% of the population.
Bengali says an overwhelming majority of Pakistanis can afford to live in their own houses because the free-market mechanism does not actually operate in the country’s real estate sector. Many people receive land on subsidised rates, he informs us, because of professional affiliations. “The government announces housing schemes regularly for its employees in different ministries and departments. That enables people to acquire land at negligible costs,” he says; adding that land is the primary expense in real estate, because physical structures can be built gradually over an extended period of time.
Published in The Express Tribune, July 30th, 2012.