Pakistan Real Estate Market Synopsis for the Last Decade and Outlook for the Next Decade

February 28, 2020

After promulgating amendments in the 2001 Income Tax Ordinance, more than 85% of the real estate developer has stopped construction engineering for their ongoing projects in Pakistan. The real estate sector in Pakistan has tremendous potential to grow and a fast pace, but obstacles, unfair taxes, and bureaucratic hurdles hamper its growth drastically. The real estate sector and builders’ and developers’ importance are undeniable in a country’s lifting economy.

According to statistics, Pakistan’s real estate construction work spends more than 2% of its Gross Domestic Product that accumulates roughly more than $5.1 billion. Choking resources and lack of infrastructure in tackling internal mass migration in search of better living and earning opportunities requires careful urban planning and researched the real estate market usage.

Pakistan’s real estate market mainly comprises residential, commercial, agricultural, and industrial properties. After 9/11, a massive influx of money created an enormous jump in Pakistan’s major cities’ residential and commercial properties. The start of the 21st century also witnessed some tycoons entering into developing housing schemes for upscale people. Many immigrants at that time knowingly migrated back to their home country Pakistan. But many ex-pats left their hard-earned money on federal agencies’ biased discretion as those hot pursuits of money trails and facilitators of the Afghan Taliban and Bin Laden.

The ongoing investigations range was broad, and bank accounts were searched vigorously to find out clues from were big chunks of money laundered back to Pakistan. And agencies in the U.S. were also questioning the account holders about their businesses. This chaotic and uncertain future in the U.S. resulted in millions and millions of dollars landing in Pakistan. Both the real estate marketplace and the stock market witnessed a phenomenal increase.

Where commercial and residential and even agricultural and industrial land prices went too high to record historical highs, the demand for land, no matter what the type was, too high. The euphoria was so intense that the mafia created file-based corruption where only files were exchanged no actual transaction took place; that bubble burst in 2005 and 2006, where both the real estate market and equity market touched their lows. The global economy suffered a dent due to the credit crisis in the U.S. Most of the developed economies battered by this, and the world started seeing recession that soon engulfed Asian economies, and Pakistan was no exception. Slowed growth and less consumer demand led by a series of Middle Eastern rebellions and a drastic decrease in crude oil prices.

Fluctuating trends have been observed in Pakistan’s real estate market in the past few years. In the last four years, from 2013 to 2017, a bullish trend has been observed. Still, since the PTI government has taken charge of real estate in Pakistan, it is continuously facing a downward trend in property value, and the volume of transactions taking place has been reduced to an alarming low.

Pakistan’s real estate market is continuously deteriorating, and a fall in property prices is evident in almost all major cities and areas. The property dealings are reported to be record low at present. The effects of amendments in Income Tax Ordinance-2001 connected with property valuation are becoming visible, and mostly as the third quarter has ended, they are getting widespread. The demand in the real estate market is continually fading, and people are merely wondering with no intention to invest, thereby sparking a collapse in the real estate market.

COVID 19 played a vital role in the economic slowdown of the whole world, especially in developing countries like Pakistan. Currently, 2nd wave is believed to be more lethal fast spread with the start of the coming winter season. The PTI government is getting weaker and weaker with each passing day, businesses are down across the board, and Naya Pakistan’s dream is fast fading. Opposition parties have united to bring down Imran Khan’s current regime as inflations have risen, the Pak rupee has lost its value to  165 against a US$.

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