A PASSENGER plane with 98 people on board has crashed in a crowded neighbourhood on the edge of the international airport near Pakistan's southern port city of Karachi after what appeared to be an engine failure during landing.

Karachi mayor Wasim Akhtar said at least five or six houses were destroyed in the crash of the domestic flight operated by Pakistan International Airlines.

He said all those on board died, but two civil aviation officials later said that at least two people survived the crash.

Local TV stations reported that three people sitting in the front row of the plane survived and aired footage of a man on a stretcher they identified as Zafar Masood, the head of the Bank of Punjab.

They reported that at least 11 bodies were recovered from the crash site and six people were injured. It was not immediately clear if the casualties were passengers.

Police wearing protective masks struggled to clear away crowds to allow a fire engine and an ambulance to move through the narrow streets towards the crash site, the air filled with dust and smoke. Police and soldiers cordoned off the area.

A transmission of the pilot's final exchange with air traffic control, posted on the website LiveATC.net, indicated he had failed to land and was circling around to make another attempt.

"We are proceeding direct, sir - we have lost engine," a pilot said.

"Confirm your attempt on belly," the air traffic controller said, offering a runway.

"Sir - mayday, mayday, mayday, mayday Pakistan 8303," the pilot said before the transmission ended.

The aircraft arriving from the eastern city of Lahore was carrying 91 passengers and seven crew members, said Abdul Sattar Kokhar of Pakistan's civil aviation authority.

Pakistan had resumed domestic flights earlier this week ahead of the Eid-al Fitr holiday marking the end of the Islamic fasting month of Ramadan.

Pakistan has been in a countrywide lockdown since mid-March to try to stem the spread of coronavirus.

Witnesses said the Airbus A320 appeared to attempt to land two or three times before crashing in a residential area near Jinnah International Airport. The residential area, known as Model Colony, is poor and densely populated.

A resident, Abdul Rahman, said he saw the aircraft circle at least three times, appearing to try to land before it crashed into several houses.

Video on social media appeared to show the aircraft flying low over a residential area with flames shooting from one of its engines.

Prime minister Imran Khan tweeted: "Shocked & saddened by the PIA crash... Immediate inquiry will be instituted. Prayers & condolences go to families of the deceased."

Airworthiness documents showed the plane last received a government check on November 1. PIA's chief engineer signed a separate certificate on April 28 saying all maintenance had been conducted. It said the aircraft was "fully airworthy and meets all the safety" standards.

Ownership records for the Airbus A320 showed China Eastern Airlines flew the plane from 2004 until 2014. The plane then entered PIA's fleet, leased from GE Capital Aviation Services.