Charter of the Economy 22.2. Constraints of the Sector The level of fixed capital formation in the public and private sector combined is low in Pakistan. It had attained a peak rate of over 17 percent of the GDP over 15 years age, which has fallen to 13 percent of the GDP in 2018-19. The declining level of public development spending from 5 percent of the GDP over a decade ago to 3.5 percent of the GDP currently is primarily due to efforts at trying to control the size of the budget deficit. The mix of public investment is shifting from highways as CPEC proceeds to the next stage involving greater focus on power generation and distribution. This implies less construction activity. Investment in housing constitutes 18 percent of private investment. Currently, it is even below 2.5 percent of the GDP. As highlighted earlier, housing investment closely follows the business cycle. Consequently, the housing shortage, based on a housing standard of three persons per room, has risen exponentially and reached 4.4 million housing units on average with two rooms each. Rising Cost of Construction The cost of inputs into construction activities has been rising relatively rapidly. Between 2005-06 and 2013-14, the price index of construction inputs doubled. In 2018-19, the rise in the cost of construction was over 12 percent. The annual rate of inflation between 2007­08 and 2019-20 in construction inputs is given in Table 22.1. It has averaged 6 percent to almost 12 percent for different inputs. Table 22.1: Annual Growth Rate in Prices of Construction Inputs, 2007-08 to 2019-20 Construction Material Annual Growth Rate (%) Construction Material Annual Growth Rate (%) Wood 7.7 Steel Products 6.3 Bricks 8.0 Glass Sheets 11.1 Cement 7.3 Paints 11.5 Ceramics& Sanitary 8.4 Pipe Fittings 8.7 Source: PES Limited Access to Housing Finance The share of housing finance in total advances of commercial banks has been extremely low at 1.5 percent. This is one of the principal constraints to the expansion of the housing stock in the country. Latest estimates are that the quantum of outstanding loans is only 0.25 percent of the GDP. This compares with 11 percent in India, 8 percent in Sri Lanka and 3 percent in Bangladesh. 214