The production of fresh water is decreasing due to loss in movement of water from natural resources, because of the rapid degradation in watersheds, soil erosion, deforestation, urbanization and due to the untreated discharge of municipal and industrial wastewater into the rivers and water bodies. Housing and infrastructure development being the top priority at government level is also impacting the health of watersheds; resultantly our dams are losing their capacity due to increased sedimentation. Keeping in view the importance of our water reservoirs for irrigation and energy production, industrial and domestic use, this study that encompass the hydrological and socioeconomic impacts of infrastructure (including housing) development in Simly and Mangla watersheds was designed and conducted. It aimed at assessing the current magnitude and distribution of development in the study area. Infrastructure development was correlated with soil erosion, quality and regime of water in the channels. Based on the results, critical watershed zones, vulnerable to destabilization were delineated. Socioeconomic impacts of infrastructure developments were also studied by conducting survey and using Delphi technique. It has been established by the researchers that impervious area in a watershed should remain below 10 percent. But impervious land use in Simly watershed has already crossed this limit (13.23 percent) and is increasing at a pace of 1.91 percent/year. In Mangla watershed the impervious areas is 9.81 percent, this has almost reached the allowable limit. It has also been determined that at current pace of development, 16.84 percent of the area in Simly will be under impervious land use. Similarly in case of Mangla Dam due to the development of improved road network, tourist facilities and other allied infrastructures in the area this watershed will also cross this safe limit within a few years. The relative impacts of different land uses was then correlated with the intensity of soil erosion, sediment load in stream water, water quality, and water regime. Based on the land use of the area, different channels in the Simly stream system were categorized into Urbanizing, Agriculture, Forest and Main channels. So that the responses of the watershed under different land uses could be compared. The study revealed that the soil erosion is more in areas under xiiiimpervious land use or where the land is disturbed due to development activities. Similarly, the sediment load in different categories of channels was studied. It was found that sediment load in the urbanizing water channel was highest (26.03 g/l) followed by Agriculture (8.86 g/l), Main channel (2.6 g/l) and Forest (1.73 g/l) was the least contributor of sediment in the channels. Water regime of different categories of channels was also studied. The results of study showed that urbanizing streams do not flow at a steady pace, these are either dry or in flood conditions. Forests tributaries on the other hand showed more steady flow, both dry and flood instances were less in this category of channels. Similarly rate of sediment deposit in the reservoir also increased due to the increased development activities specially construction of Islamabad Muzzaffarabad Dual Carriage Way (IMDCW). From 1983 to 1999 sediment contribution of watershed was 19.77 m 3 /ha/year, which has increased to a tune of 22.03 m 3 /ha/year during 1999 to 2009. This enhanced rate of sedimentation is attributed to the development activities specially IMDCW. Water quality of the stream system has also been deteriorated. Turbidity and hardness was more in Urbanizing as compared to other land use. Similarly Coliform and E.coli count was more in urbanizing category of channels. Slope, soils, climate and land use are the important factors that impact the hydrology and determine the vulnerability of the areas to destabilization. The areas falling in different slope bands were determined. It is generally considered that areas having a slope up to 15 percent are fit for agriculture. Areas having a slope of 15-30 percent should be put under fruit trees whereas at a slope above 30 percent, the area should be kept undisturbed under forest trees and shrubs. The areas under different slope bands were determined. The areas with slopes above 50 percent were delineated as critical areas. Prudence should be observed while taking up large scale development activity like construction of highways and development of townships. The study has also revealed that the socioeconomic condition of the communities has improved. Life expectancy has increased. In 1991 only two percent of the population was above 70 years which has now increased to 3 percent. Literacy rate in the area has also increased from 70 percent in 1998 to 74 percent in 2009. Improvement in literacy has been seen especially in female xivpopulation. Forty percent of the female population in the age above 18 years was illiterate whereas in the females below the age of 18 years illiterate population is only 16 percent. This is a positive social change. The female child is also gaining the same importance as the male child. Average number of rooms per housing unit has increased from 3.7 in 1991 to 6.07 in 2009. Similarly construction quality has improved. The people have shifted from stone in mud masonry and wooden roofs to stone in cement masonry and corrugated sheet roofs. Only 37 percent of households had bath rooms in 1991 whereas the households that have bath rooms have increased to 85 percent. Analysis of the data revealed that per-capita land holding of the communities living in the watershed is very small (0.132 ha.). The small land holding, low agricultural productivity, alternate job opportunities and high land prices offered by private land developers for townships has decreased the interest in farming. This has further accelerated the deterioration process in the watershed.