KARACHI: Pakistan’s property market has attracted billions of rupees over the last three years because of extraordinary returns. These returns come on the back of differences in demand-supply, speculative trading in the real estate sector and its ability to be a safe-haven for tax evaders.
The growth story was broadly intact until the middle of 2016 when the government brought in new regulations. However, despite a major turmoil, the sector succeeded in getting concessions from the government and the market rebounded at the end of the year. Improving security situation and macroeconomic indicators have played a key role in fuelling the property boom.
Despite the mouth-watering growth in the property market since 2013 (which was more than 100% in many cases), builders and real estate dealers in big cities like Islamabad and Karachi say the market is all set to head further north in the current international scenario.
“Pakistan is a virgin market and there are numerous business opportunities here. Tell me which sector is not growing in Pakistan?” asked Association of Builders and Developers of Pakistan (ABAD) Senior Vice Chairman Muhammad Hassan Bakshi.
“This is a rare situation when world markets are in turmoil and Pakistan’s economy is going from strength to strength.”
Bakshi, who represents ABAD, an association of over 700 builders, said Pakistani investors including builders and developers were returning to the country because of current high returns in the local market.
Builders say Pakistani investors are pulling out of Dubai’s property market and bringing money back home because of a marked improvement in the security situation.
“Recent harsh policies of (US President) Trump will further encourage Pakistani investors to shift their money to local markets because of eye-catching returns. This is a blessing in disguise and our government should encourage these investments,” Bakshi added.
The China factor
Pakistani businesses are mainly banking on the China-Pakistan Economic Corridor (CPEC) projects of around $57 billion, which makes about one-fifth of Pakistan’s $270-billion economy. Analysts say massive Chinese trust in Pakistan and its economy is attracting overseas Pakistanis and foreign investors like a magnet.
Currently, Chinese companies are buying industrial properties in Pakistan. But analysts think Chinese nationals may soon be able to buy real estate and if this happens, the country’s property market will shoot up further.
“Right now, only Chinese companies are allowed to buy property in Pakistan. As individuals, Chinese nationals cannot buy property here,” said Younus Rizvi, a Karachi-based real estate dealer. Dubai Land Department data shows Pakistani investment in Dubai’s property market dropped close to $1 billion in 2016 compared with 2015.
It is still unclear where this money is being invested, but leading builders believe the money is mainly going to Pakistani property market and some may be going to the Pakistan Stock Exchange. “Pakistani property markets are rebounding strongly and investments are flowing to all big cities of the country,” said former ABAD senior vice chairman Arif Jeewa, who is based in Islamabad.
Explaining why Pakistani investors were pulling out of Dubai, he said the UAE government wanted to increase tax generation, so it was applying the value added tax, which would obviously discourage new investments. Builders say Pakistanis opted for a second home in Dubai because of poor security situation in the country until 2013. But now the situation is fast changing and there is no need to keep expensive houses in the UAE, especially when the investors can get attractive returns in Pakistan.
Published in The Express Tribune, February 6th, 2017.