KARACHI:
After a slow start early in 2014, the real estate market was expected to pick up some activity in the second half. However, the ongoing political unrest in the federal capital seems to have dented investors’ confidence, resulting in a decline in property prices in Islamabad – and to some extent in Lahore.
“Generally, our traffic skyrockets right after Ramazan but it didn’t happen this year,” said Zeeshan Ali Khan, co-founder and CEO of Pakistan’s largest real estate portal Zameen.com.
Imran Khan-led PTI and Tahirul Qadri’s PAT have held sit-ins in Islamabad as they demand the resignation of the prime minister. The demonstrations, which have virtually paralysed Islamabad, are now into their third week.
Speaking to The Express Tribune in a recent interview, the CEO explained that the activity in the property market remained slow in the first half of 2014 but it was expected to pick up after Eid.
“Overseas Pakistanis, returning home for Eid, are a huge catalyst for the property sector; the expatriates, who account for roughly 40% of the real estate transactions, generally fuel the activity in the market.”
However, this year market slowed down further because of the recent political uncertainty in the country, said Khan, noting a significant decrease in the property prices during the month of the August – especially in Islamabad.
The search trends for Islamabad, a preferred choice over Lahore from investment perspective, were down 10% between July-August, according to statistics compiled by the Lahore-based property portal. Every single platform including Google search and referral traffic, such as the one from Facebook showed a similar trend, he said.
According to Zameen.com, 1-kanal (500 square yards) plot prices in Islamabad’s various popular areas fell between July and August. In F-11, 1-kanal plot prices fell from Rs48.2 million in July to Rs48.1 million at the end of August, down 5.3%. Likewise prices in DHA, E-11, F-10 and B-17 were down 1.9%, 0.64%, 8.7% and 0.87% respectively.
What further endorses this trend is the feedback Khan got from the network of his partners — the real estate agents in Lahore and Islamabad. Some of the agents had to return the advance payments, six payments in one case, to the clients because the transactions couldn’t complete, he said. “People want some kind of stability before they could invest money.”
Khan added that though Islamabad has incurred the most loss, Lahore suffered some repercussions as a peak decline can be witnessed right after the Model Town tragedy. “However the market in Lahore has to some extent recovered.”
According to the data, for search trends, compiled by Zameen.com, genuine buyers [home seekers] remained active in the market even in August whereas investors mostly remained dormant. Zameen.com recorded a 9.7% drop in the number of investors browsing for plots in Islamabad. Similarly, Lahore, too, saw a drop of 2.9%.
Interestingly, Karachi remained unaffected from the entire political turmoil and saw a 21.5% rise in the interest of investors, noted zameen.com CEO. “There is a possibility that investors diverted attention to Karachi because of the political unrest in the Punjab,” Khan said.
While the rising political instability affected the real estate market, the decline in prices, according to Khan, was in part a correction to the extraordinary price increase the sector witnessed in 2013.
The market saw enormous activity around the election time and the prices increased significantly, the CEO said.
“Some investors gained up to an average 50% return on their investment by the end of 2013 because the sentiments were very positive,” he said.
According to Khan, the PML-N government is generally viewed as highly pro-business, one of the reasons why market performed so well in 2013.
With a pro-business government in power, Khan said, investor sentiment was very positive. Moreover, after assuming power, the PML-N government announced an array of projects, which further helped in rejuvenating the market, according to Khan. “In September 2013, there were talks of a $12-billion “New Islamabad” project and in May 2014, the LDA City Lahore project was announced.”
Even if the situation continues to worsen on the political front, its impact on the real estate sector will be short-lived, Khan says. “In general, our real estate market is very resilient, mainly because it is cash-based and not mortgage-based. After all, it is one of the biggest sectors where people invest.”
Published in The Express Tribune, September 3rd, 2014.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ