Association of Builders and Developers (ABAD) Chairman Muhammad Hanif Gohar has expressed concern over the State Bank of Pakistan’s reported decision to raise the policy rate by 0.5 percentage points to 12%.

Gohar said higher borrowing costs could put additional pressure on Pakistan’s construction industry, discourage investment and threaten employment. He called on the authorities to reverse the increase and significantly reduce interest rates to support economic activity.

He warned that the impact could extend beyond construction to the wider economy, given the sector’s links with numerous businesses and industries.

Higher Borrowing Costs Could Delay Construction Projects

According to Gohar, higher interest rates could increase financing costs for developers and make construction projects more expensive. The resulting pressure could discourage investment and make it harder for businesses to launch new developments.

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He also pointed to rising steel bar prices, warning that construction costs could increase further if cement, steel and other building materials become more expensive.

Higher costs could place additional pressure on an industry already facing significant challenges. They could also make it more difficult for ordinary citizens to afford homes and other buildings.

Housing Shortage Adds to Industry Concerns

Gohar highlighted Pakistan’s reported shortage of 10 million housing units, saying rising construction costs could further limit access to homeownership.

He argued that policies affecting borrowing and construction costs should take the country’s housing needs into account. Higher financing expenses could affect developers’ investment decisions and make housing projects more difficult to undertake.

The scale of the housing shortage also underscores the importance of affordable construction and access to financing for prospective homeowners.

ABAD Chief Warns of Risks to Jobs and Allied Industries

Gohar said more than 100 allied industries depend on construction activity and could face difficulties if projects slow down.

These industries include businesses and workers involved in supplying construction materials, as well as contractors, skilled labourers and other service providers. A slowdown in construction, he warned, could reduce demand across these connected sectors.

He expressed concern that declining activity could increase unemployment and deepen the financial difficulties facing households.

Gohar stressed that construction plays an important role in economic activity and employment, urging policymakers to consider its wider impact when making monetary and economic decisions.

Call for Policy Measures to Support Construction

The ABAD chairman called on the authorities to address the challenges facing the construction sector and consider the possible consequences of higher borrowing costs.

He maintained that lower interest rates could help improve financing conditions, support investment and protect employment opportunities.

The policy rate and its impact on construction remain important concerns for developers, particularly as they assess project costs, investment decisions and the affordability of new housing.