For common people across the world, wealth accumulation has always been one of the most important long-term goals. How they invest it, and in what form they collect it, differs from region to region, and country to country. And, in Pakistan, people, particularly the middle class, love to invest their wealth in real estate, especially residential housing.

Almost 80 per cent of wealth accumulated by Pakistanis, aged between 60 to 65, is in the form of residential housing, according to a new study by the World Bank. Investment in residential housing is considered a much safer option in comparison to other options in the country of around 2160 million people.

The study, “Life Cycle Savings in a High-Informality Setting — Evidence from Pakistan”, released last week, provides key characteristics of Pakistanis when it comes to wealth creation.

Between 25 to 65 years, an average household’s wealth increases by almost 60 months’ worth of consumption. While the wealth in other forms such as land, farm, businesses and financial assets stagnate, the share of residential housing in the total wealth increases.

Accumulation of assets picks pace after 40 years of age.

The study also highlighted that financing elderly consumption is becoming a major challenge, mainly because of the ageing population, weakening family and village risk-sharing networks, and low formal pension coverage.

Significantly, the report also flagged the lack of financial literacy and access to other safe and high-return options as one of the reasons behind their greater faith in residential housing.

Only 3 per cent of those aged 15 years and above in Pakistan report being able to rely on savings for emergency funds, while 49 per cent report it is not possible to come up with emergency funds, according to Findex, a global financial consultancy firm.

Family and friends remain the primary source of emergency funds, according to 41 per cent of the population aged 15 years and above. 25 per cent borrow for emergency medical expenses.

(SAM)