Why investors are ditching Pakistan Real Estate

5 months ago

In the last decade Pakistan real estate sector performed exceptionally well as property prices doubled approximately after every five years. This abnormal growth was due to the huge capital inflow in real estate. But now prices are cooling down across the country as things have changed. The year 2019 is a bad omen for reality sector as it is hard to find investors in the market. Here’s why investors are ditching Pakistan Real Estate.

Real Estate Scams
According to NAB there are thousands of illegal housing schemes in Pakistan. People have lost their life savings due to widespread real estate scams. Even frauds are being reported in the well known housing schemes. Gwadar real estate frauds are the talk of every town as developers sold out the societies without having land in Gwadar. Due to these frauds investors are now very cautious. Even many have diverted their investments to other sectors.

High Interest Rates
The rise and fall of interest rate has huge impact on real estate. Low interest rate increases the investment in reality sector whereas high interest rate decreases the capital inflow. Pakistan interest rate now stands at 10.25%. The high interest rate has declined the property investments. This is because people are getting more profits on fixed deposits from banks. The capital flight from real estate to banks is the major cause of property price decline.

New Property Laws
Pakistani Government has introduced many property laws in the last budget. According to the new property laws, firstly non-filers can’t buy property worth more than 5 Million PKR. Secondly foreign Pakistanis have to send money within 60 days before the property transfer. Thirdly registration authorities will be fined if the process the files of non-filers. These laws have diverted the investments away from real estate.

Property Valuation Rate Increase
On 1st February 2019 FBR raised the property valuation rates in 20 cities across Pakistan. The rate increase has made the real estate transactions expensive due to which volume has decreased. The day trading has almost ceased. Property valuation rate rise has slowed the market. Now only genuine buyers are buying properties whereas investors are moving to other sectors.

Black Money Crackdown
Real estate sector is generally considered as the safe heaven to park the illegal money. But things are changing now as buyers have to provide the source of income. Pakistani reality sector that once thrived on black money is now in decline. People can’t hoard properties beyond their incomes because NAB is acquiring about the income source. Due to the ruthless accountability, investors with black money are afraid of losing money.

Pakistan Real Estate Market Watch
Pakistan Property Market is almost dead as there are very few buyers in the market with white money. Without black money investments, Dubai property prices have declined by 75%. Same is happening in Pakistan as market is adjusting to the new purchasing power of white money investors. Due to low transactions many property dealers have closed their offices. Realtors claim that if property laws are not changed, real estate prices will fall by 40-50% in 2019.

Source:  March 1, 2019 by Anwaar ul Islam at ghar47.com


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