Middle class homebuyers in urban Pakistan are increasingly demanding better facilities and real estate developers are increasingly competing not just on price but also on the quality of communities they can build.
“The living standards of people are changing in cities like Lahore,” said Mian Ayaz Anwar, president of the Zaitoon Group, a real estate development company. “That is forcing us to bring what is called ‘lifestyle real estate’ to the market, and add value to the communities, including improving the architecture.”
Anwar is referring to the increasing trend in Pakistani cities of suburban developments where entire neighbourhoods are built by a single real estate company, similar to the Levittown developments that were built in the United States after the Second World War. People are increasingly demanding that these neighbourhoods have amenities that were once considered luxuries.
“Homebuyers want security, community centres, hospitals, cinemas, parks, and even golf clubs all within their own neighbourhood so that they do not have to commute long distances,” said Anwar. “Real estate companies that offer these facilities – like Bahria Town – see their developments get sold out in no time. Bahria Town offers virtually a mini-city inside its developments.”
It was not always so. There was a time when the real estate developments in Lahore were based purely on providing housing units, with little regard for any other facilities. The military-owned Defence Housing Authority began offering a few improvements in infrastructure but the trend did not catch on until the late 1990s, when Bahria Town began offering ‘lifestyle real estate’. From then on, a trend started that has continued since.
The intense competition by real estate developers to offer such services seems counter-intuitive in a country that has a severe housing shortage. Experts in the real estate sector say the country is currently short by about 8 million units, a requirement that goes up by about 7.5% a year.
Cities like Lahore are seeing population increases upwards of 6%. Lahore’s population is expected to double from the current 11 million by 2025. But that is not the only driver of demand. Many of the residents within the city who used to live in joint family dwellings are moving into their own housing as the youth bulge increasingly comes of age and starts earning.
“Around 80% of the growth in Lahore has been along the Canal Bank, with the rest largely in DHA,” said Anwar.
That trend, however, is likely to change once the Lahore Ring Road is completed, which will provide much faster access to the heart of the city from its outer suburbs. “Many people are booking plots in projects [in these outer suburbs], in anticipation of the completion of the ring road, which is causing prices in these areas to rise,” said Anwar.
Real estate is becoming an increasingly important sector for the Pakistani economy, employing well over 5% of the country’s labour force directly in construction and much more in related industries. Yet a key hindrance to the development of the sector is the availability of housing finance. According to the State Bank of Pakistan’s latest available figures, the total value of home loans in Pakistan’s banking sector was Rs50 billion in December 2010, or about 1.5% of all loans outstanding.
To overcome the lack of housing finance, most real estate developers offer financing to their buyers themselves, offering instalment plans for the housing units they sell.
Published in The Express Tribune, April 22nd, 2012.