Real estate is an important and promising sector of the economy of Pakistan. The property market in Pakistan has been developing rapidly in both the commercial and residential sectors. This not only attracts local investors but also expatriates and overseas Pakistani’s. Moreover, investment in real estate is the most common way to protect capital and earn a handsome amount of monthly rent. Following are some of the factors impacting the real estate industry in Pakistan
- New taxes: A blow to real estate development
Despite fuelling the economy and creating employment, housing and construction has not been viewed as a major industry yet. Their 2.3% contribution to GDP is still below the required 5% threshold. With the elections, private developers were looking forward to incentive plans but instead have been levied with a 16% tax on single housing units. The tax will be charged on the cost of land, excluding other expenses. This served as a blow to real estate development, as the developers and contractors needed tax relaxation and other incentives in order to double their contribution to GDP.
- Internal migration flows to Lahore
Amongst the plethora of cities offering investment options, Lahore is definitely the most popular one due to its secure environment and modern luxuries. As a result of its stable law and order situation, recently Lahore experienced a migration wave from rural regions. Migration and an ever-increasing population are factors that lead to the real estate market in Lahore marching to new heights. A glance at the real estate market Lamudi shows DHA is on the lead with a 1 Kanal house having a price range of Rs.35,000, 000 to Rs.70,000,000, seconded by Bahria Town where the average price is around Rs.50,000,000. Regular monitoring of the property price developments in Lahore remarks an increase by a whopping Rs.4 million in just a month.
- Law and order situation in Karachi
The law and order situation in Karachi has had a drastic impact on the property prices. They have remained stagnant in safer areas compared to low income areas where the situation is fragile. The prices in DHA have remained steady and those of Phase 6 and 8 are even on the rise. Whereas property prices in Gulshan, North Nazimabad, New Karachi, Lyari and Mauripur have dropped drastically. The government is taking stern actions to improve the condition and has appointed rangers and law enforcing agencies to provide a secure environment to Karachiites. The property prices are expected to be more stable but investing in the Karachi market still remains an unsafe option.
- Favorable investment climate for expats community
The government has recently approved an investment scheme for overseas Pakistani’s, who are keen to invest in small and medium-level businesses in Pakistan. Due to this favorable attitude of the government, the investors and expats are returning to the market and the land prices are expected to escalate in the coming weeks.
As mentioned above, the real estate economy positively contributes to the economic growth of the country and it is the duty of the government to formulate legislation for the investors to have an even playing field and avoid risks to the sector.