Pakistan Approves 85% Increase in House Rent Allowance for Federal Employees –2025 Update

Islamabad: The Government of Pakistan has officially approved a massive 85% increase in the House Rent Allowance (HRA) for all federal government employees, from Grade 1 to Grade 22.

This long-awaited decision, finalized by the Ministry of Finance, aims to provide financial relief amid record inflation and rapidly increasing housing costs across Pakistan.

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The summary has already been forwarded to the Federal Cabinet for final approval, and once ratified, the new allowance will take effect in upcoming salary cycles for all federal departments.

Key Highlights of the New HRA Policy

What’s New – The 85% HRA Increase Explained

For the first time in over a decade, housing benefits will be calculated based on current basic salaries, replacing the outdated 2008 pay scale.
This reform ensures that employees’ compensation now reflects today’s housing market realities and rising living expenses.

“This decision will ease the financial pressure caused by inflation and rising rents,”
— A senior official from the Ministry of Finance stated.

Why the Increase Matters

For years, government workers were receiving housing allowances based on 2008 salary figures, leaving them unable to afford suitable housing in cities like Islamabad, Lahore, and Karachi.
The new increase corrects that imbalance — providing fair and realistic support for both junior and senior employees.

Impact Across Employee Grades

1. Lower & Middle Grades (BPS 1–16):
These employees will see the most meaningful benefit, as rent costs often consumed a major portion of their income. The 85% raise provides direct financial relief.

2. Senior Officers (BPS 17–22):
Higher-grade employees will now enjoy updated allowances in line with current salary structures, eliminating long-standing departmental discrepancies.

3. Contract & Adhoc Staff:
For the first time, project-based and contract employees are also included, making this policy inclusive and fair for all government workers.

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Implementation Timeline

According to Finance Ministry sources, the Cabinet’s final approval is expected later this month.
Once ratified, the updated HRA will be reflected in November 2025 salaries.

Departments have already been instructed to update payroll systems to ensure seamless implementation and avoid any delays in disbursement.

Economic and Social Impact

This policy comes at a time when Pakistan’s urban rental markets have surged by over 50% in the past three years.
By revising allowances, the government aims to:

• Support public servants struggling with high rents
• Improve employee morale and retention
• Strengthen overall consumer confidence
• Reduce the financial burden on working families

Reactions from Employees on Increase in House Rent

Government unions have hailed the move as “a much-needed and fair reform.”
Many employees expressed hope that similar revisions will soon be made to medical and conveyance allowances, which also remain outdated.

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“After years of waiting, this 85% Increase in House Rent shows that the government understands our struggles,”
said a spokesperson for the Federal Employees Union.

Why Moving Away from the 2008 Pay Base Is Historic

For over 17 years, housing allowances were tied to 2008 pay scales — an obsolete system that ignored inflation and housing realities.
By linking the HRA to current pay structures, the government has modernized the compensation framework, ensuring long-term financial sustainability for Pakistan’s civil servants.

Key Benefits of the 85% HRA Increase

• Up to 85% boost in monthly take-home pay
• Relief from soaring rental expenses
• Applicable to both permanent and contract staff
• Fair and inflation-adjusted calculation
• Correction of a 17-year-old policy gap

Final Words

The 85% Increase in House Rent Allowance (HRA) marks one of the biggest financial relief measures of 2025 for government employees.
It demonstrates the government’s commitment to improving living conditions, addressing inflation, and modernizing outdated compensation systems.

With implementation expected soon, this policy is set to bring real, tangible relief to thousands of households across Pakistan.

Frequently Asked Questions (FAQs)

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