Real estate: Sit-ins’ effect still being felt

Stagnant performance swaying developers away from major cities.

KARACHI: The real estate market in Pakistan has recently been giving a lacklustre performance owing to consistently high prices, a trend which would change once buyers see opportunities due to price fluctuations, said real estate portal Lamudi.pk Country Director Saad Arshed.

“There are more active sellers who want to sell their properties to make profits but they are not getting suitable deals at the moment. The market is stagnant which has limited the number of transactions in most cities,” he said.

The real estate market in Pakistan has provided handsome returns to investors since the general elections in May 2013. However, the opposition’s long march and sit-in in Islamabad in August 2014 over the alleged election rigging badly dented the bullish trend.

There is some difference of opinion on how much it hit the market sentiment but most builders and property dealers are convinced that the market is still reeling from the distress it went through until December 16, 2014 – when Pakistan Tehreek-e-Insaf (PTI) formally ended its sit-in.

“The sit-ins in Islamabad created major political uncertainty which brought the market to a complete standstill,” said Arshed, “The market has revived but at a sluggish pace as most housing societies have not able to gain pace.”

Mid size cities attracting new investments

Despite sluggish performance in large cities, mid size cities like Multan, Sialkot, Gujranwala and Hyderabad have attracted investments in big housing schemes including an overall increase in construction activities.

The three main cities, Karachi, Lahore and Islamabad, are reaching their saturation levels and hence, other cities are coming to the fore with a lot of real estate investment potential. Big developers are now also focusing on smaller cities like Faisalabad, Gujranwala, Multan, Sialkot and Hyderabad. For example, Defence Housing Authority (DHA) has recently launched in Gujranwala and Multan, added Arshed.

Another leading property portal Zameen.com Chief Executive Officer Zeeshan Ali Khan said that though the main interest is still in Lahore, Karachi, Islamabad, many small developments are springing up in mid tier cities. Moreover, since these projects are more affordable compared to large scale developments in major cities, large number of people look at them as investment opportunities.

He argues that since Pakistan has the highest rate of urbanisation (3.2%) in the region, there is a lot of demand popping up in mid tier cities. These new developments have also played a vital role in raising the standard of development for the local population in these cities, he added.

Why investors are moving to Dubai?

As per Bayut.com, a leading Dubai property portal, Pakistani investors stood second by injecting $2.06 billion in the Dubai market with 5,079 property transactions in 2014. Most of the Pakistan’s real estate dealers believe that a lot of these investments constitutes of black money that is being funnelled out by influential Pakistanis including government officials, politicians, builders and other business people.

After the financial crisis of 2008, United Arab Emirates (UAE) had introduced strong real estate laws to protect the interest of investors in the property sector, which has helped Dubai recover its reputation of an attractive global property investment market.

A market sentiment survey of Zameen.com showed that 49% of the people who wanted to invest in overseas wanted to buy property in UAE.

“The trend of capital flight could grow in future because a lot of Dubai developers are heavily marketing their projects in Pakistan. But a lot depends on the performance of Dubai property sector as well which has slowed down in the past few months,” Khan added.

Published in The Express Tribune, March  7^th,  2015.

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