The financial crisis of 2008 has affected badly the real estate sectors worldwide. Everybody knows how the spectacular Dubai real estate sector collapsed when global crunch hit Dubai. Despite the fact that Pakistan is a developing country, the financial crisis could not affect it as drastically as it affected other developing nations. Experts believe that one of the reasons behind it is that Pakistan’s economy relies less on its real estate sector. The performance of Pakistan’s real estate has remained unstable after 2008. Some experts believe that is because the prices of properties have been stagnant for the last six years while others think that the sector is under stress.
The contribution of the construction sector in the country’s GDP has been slashed down to a mere 4%, from 28% in 2009. This shows that developers are reluctant to start new projects, due to the inability of the government to facilitate new gas and electricity connections for the newly build units, the high prices of the construction materials and the low demand of properties determined by people’s low purchasing power.
Though people have mixed views about the current performance of Pakistan’s real estate, all the industry specialists and Pakistani realtors are optimistic about the future of realty market. This is because the Government of Pakistan is vigilant in fixing the problem of its once spectacular real estate sector as soon as possible. The realtors three main reasons of optimism are as follows:
Though the law and order situation in Karachi is currently weak, causing some of its residents to shift to a city with better law and order i.e. Lahore, yet the government is taking stern actions to stop target killing and blood shed in the city. The Government has appointed rangers and other law enforcement agencies at the public places. Moreover, security measures have been taken on the exit and entry points of the residential colonies to provide a complete secure environment to residents.
Elections are drawing near in Pakistan and with new government, it is expected that bringing a better law and order situation in Pakistan would be its top priority list, which could increase the investment of local people in Pakistan’s properties and can bring this sector back to life.
Currently, the prices of properties in Pakistan are quite high which is merely due to high inflation in the country. Because of the floods of previous three years, prices of commodities have increased drastically, affecting badly the purchasing power of people in the country. The low purchasing power is the main hurdle for people to secure or even apply for a decent mortgage deal. The Government, in collaboration with the State Bank of Pakistan, is not only trying to curb inflation but also decrease the interest rate on home loans.
The State Bank of Pakistan slashed down the interest rate from 14% to 13.50% during 2011. This shows that the government is seriously interested to increase the purchasing power of people to help them secure a better mortgage deal for themselves. Further decrease in interest rate is expected during the following years, which would increase the demand of properties in the country. Diminishing the disparity between demand and supply would bring prices down and set Pakistan’s real estate sector back on track.William King is the director of Pakistan real estate and mainly deals in Karachi, Islamabad and Lahore real estate. Being an entrepreneur and passionate blogger he likes to share his knowledge and expertise with the industry people by writing for various related blogs.