Real estate investors make hefty profit despite new taxes

Published: January 26, 2017
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LAHORE: The highly lucrative realty markets of Pakistan still drew investor interest in calendar year 2016, though the federal government slapped heavy taxes and announced a reassessment of sharply lower land prices.

Following the first half (Jan-Jun) of the year, when real estate markets touched new peaks, the next six months were not too bad at least as far as the drop in land prices is concerned.

Slowly but surely real estate sector picking up

In that period, when it seemed that market activities had taken a severe dip, a few investors kept making profits in some areas whereas others waited for reversal of the new tax regime.

According to the annual statistics for 2016 released by property portal Zameen.com, the Defence Housing Authority (DHA) Gujranwala led the momentum with a surge of 42.23% in prices of 10 marla (250-square-yard) plots and increase of 38.96% in one-kanal (500-square-yard) plots.

No other DHA zone and other localities throughout the country came close to these levels. The primary reason behind the price jump in DHA Gujranwala was comparatively lower land prices there that stood below Rs4 million as the new tax structure did not apply to these pieces of land.

Lahore

The overall performance of Lahore’s property market was not very impressive in 2016. Though prices of one-kanal and 10-marla plots in DHA Lahore Phases VII, VIII and IX rose 5.24% and 6.80% respectively, the modest growth could not be replicated in LDA Avenue-I, Bahria Town and Wapda Town.

Prices of one-kanal plots in LDA Avenue-I, in fact, dropped 1.43% over the course of the year.

On the other hand, the performance of Bahria Orchard was satisfactory as the average price of 10-marla plots in the locality increased 11.19%.

Real estate investors still wary of amnesty scheme

This number could have been more impressive, but after new taxes were imposed in July, the price growth slowed down for the remainder of the year.

Islamabad

The property market of the capital remained subdued with unimpressive numbers during 2016. DHA Islamabad was the only major residential project where average prices of one-kanal and 10-marla plots significantly increased by 7.43% and 9.10% respectively.

On the contrary, prices of one-kanal and 10-marla plots in Bahria Town dropped 9.49% and 6.82% respectively.

Real estate prices showed stability in Sector E-11 while in Sector B-17, a moderate 6.94% drop was recorded for the one-kanal category. Prices remained somewhat stable in Gulberg Residencia.

Karachi

Karachi performed relatively better compared to Islamabad. Though DHA City registered a stellar performance, Bahria Town and DHA recorded moderate advances.

Average prices of 500-square-yard and 250-square-yard plots in DHA City rose 21.35% and 11.31% respectively in 2016 whereas Bahria Town registered a price increase of 7.69% in its 500-square-yard category.

Gujranwala

Though DHA Gujranwala had not been launched officially, property prices there still showed a positive picture in 2016.

According to Zameen.com, average prices of one-kanal and 10-marla plots in the locality recorded a whopping 38.96% and 42.23% increase respectively, indicating heightened investor interest despite the new tax structure.

With development work progressing, Master City was also a highlight of Gujranwala’s property market. Average price of 10-marla plots in the locality spiked 13.42%.

“The property market has a lot of potential to add to the national exchequer and this sector needs to be regularised properly. The new tax regime could have been rolled out in a more gradual manner to ensure that the market does not plunge. But now that the new taxes are in place, we’re looking to 2017 for a gradual return to normality,” said Zameen.com CEO Zeeshan Ali Khan.

Published in The Express Tribune, January 26th, 2017.

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Reader Comments (8)

  • fahim
    Jan 26, 2017 - 10:49AM

    I sold my plot in Bahria Orchard at 28% loss, ground realities are not good as stated Recommend

  • Naeem
    Jan 26, 2017 - 12:00PM

    That is typically how you define a bubble…unless in this case the government is backing the crime and synidicate.
    No where in the world would government first pass laws and then change them so that undeclared, un taxed, corruption money is funnelled into real estate.
    It a money laundering scheme and thats what it should be called.Recommend

  • Khalid Javaid
    Jan 26, 2017 - 12:26PM

    @fahim:
    Bahria Orchard has not gone into losses for medium term investors, however for day traders type of investors, any downward swing may be a loss.Recommend

  • Hassan Ali
    Jan 26, 2017 - 2:04PM

    @Naeem; you are so correct,this real estate investment followed by Real Estate tax amnesty is a money laundering scam. This nation is suffering due to massive flow of black money into Real Estate sectorRecommend

  • Sandip
    Jan 26, 2017 - 8:36PM

    Where is all this money coming from? For a country that is absolute broke all the time, it is indeed fishy. The real estate, the stock market etc just don’t add up to the performance of the Pakistani economy. I hope someone can explain the dichotomy here.Recommend

  • Ali
    Jan 26, 2017 - 10:30PM

    @Sandip:
    You indians will never understand pakistanRecommend

  • Jay
    Jan 27, 2017 - 8:14AM

    @Sandip,
    Pakistan has great leaders, like Nawaz Sharif and Zardari, who lead by example on how to turn black money into golden real estate. What more can you ask from a ‘leader’?Recommend

  • FAZ
    Jan 27, 2017 - 8:24AM

    @Sandip:
    Absolute broke all the time?
    This shows not only your economic understanding, but your failure to use internet for information source rather than relying upon your media that Pakistani government has denied our access to here in Pakistan. It was such a mood changer when we use to watch Indian media. It just made be rofl all the time!Recommend

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