Traditionally, Pakistan’s real estate sector has long been considered a source of profitable investment. Due to rapid population growth and increasing trends of urban settlement, there is an acute shortage of houses in the country. It is estimated that Pakistan needs at least seven million new housing units annually to meet current and future domestic demand.
However, this year the market is facing challenges due to economic uncertainty, revising government regulations and unpredictable consumer behavior. Bashir Chaudhry, an Islamabad-based senior journalist associated with Saudi media house, highlighted in a story. According to him, there is a significant decrease in property prices and sales in the market during the previous year.
“Along with this, the political situation in Pakistan always plays a significant role in the improvement or deterioration of the real estate market,” Chaudhry wrote, emphasizing that: “The ongoing political turmoil in the country, especially protests by various political parties on a regular basis, has created an atmosphere of uncertainty for people interesting in investing in the real estate sector.”
Chaudhry believed that that the market has been significantly affected by the broader economic challenges facing the country. High rate of inflation, devaluation of currency and rising cost of construction materials have led to slowdown in property transactions. Apart from this, the increase in interest rates has also reduced the purchasing power of potential buyers. Due to this, investors are taking a cautious approach.
As people’s confidence in government policies regarding the IMF demands has shaken, investors are saving their money in banks as 18 to 20 percent markup is available. Some investors have taken their money abroad while overseas Pakistanis are also losing confidence in the country’s real estate market. Both local and foreign investors are reluctant to commit to long-term projects because they fear sudden policy changes or possible market disruptions.
Effect of Political Turmoil to the Real Estate Investment?
“The delay in formation of a stable government and fears of future political instability have further destabilized the real estate market,” Czechangez Khan Jadoon, a senior beat reporter who also covers the Capital Development Authority (CDA), said. According to him, many potential investors are focusing on ‘wait and see’ policy for the political landscape to become clearer before making investment decisions. “However, if you invest in the right place, it is not harmful at all. Even then, prices in CDA sectors have gone up.”
Although the prices have decreased, but this decrease is also similar to the prices that went up all at once in the recent past. Whenever there is a down in the real estate business, there is also a hype associated with it. Even now, the property that exists has not been damaged, but the file business has almost stopped. In this regard, Aeon & Trisl, a leading brokers representing prestigious developers in the region, enlisted Islamabad, Lahore, Karachi, Rawalpindi, Faisalabad and Multan as top Pakistani cities in terms of rapid returns on investment.
Similarly, the current construction rate falls far short of meeting this requirement, resulting in the overall housing deficit in the country exceeding one crore units. Projects like the government’s Naya Pakistan Housing Program are trying to fill this gap, but the project has not yet met with the success it was hoping for.
People associated with the property market are optimistic that the real estate business will not suffer further downturn. Several property dealers who deal in public sectors are of the view that those who invested with the next 10 to 15 years in mind are now at a loss.
Foreign Investment in Pakistani Real Estate Sector?
Dr. Mohammad Arif, Editor of Chinese language news agency NSN, disclosed some interesting facts that although the real estate market is slow, foreigners, especially Chinese nationals, are taking keen interest in the Pakistani estate real market in the context of China-Pakistan Economic Corridor (CPEC) project. So, wherever investors are looking to construct something in the form of houses, apartments or commercial offices, there is some activity in the market. Dr. Arif, who enjoys cordial relations with Chinese investors, stated.
Majority of the real estate agents believe that with the improvement in the political situation, the property market is likely to improve and the prices will rise. “So, we can say with full confidence that this is a very good time to invest in the Pakistani real estate sector,” a property dealer assured.
Despite the challenges, Pakistan’s real estate market offers opportunities to investors, as the demand for affordable housing is much high in urban areas. Developers must focus on low-cost housing schemes in the larger public interest.
~ SABAH UDDIN QAZI