Real estate sector set to go north on back of CPEC, Trump

Published: February 5, 2017
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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.

Trump’s executive order adding to interest in Pakistan’s property market

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.

From Dubai back to Pakistan: the real estate investors’ journey

“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.

Good news from Pakistan

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.

Pakistan predicted to be world’s fastest-growing Muslim economy in 2017

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.

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Reader Comments (11)

  • chinto
    Feb 6, 2017 - 1:04PM

    Good news for all Pakistanis and overall investment in the country is increasing. Day is not far ahead when Pakistan will be Asian tiger.Recommend

  • Faisal A Malik
    Feb 6, 2017 - 1:38PM

    As a salaried individual, I feel trapped in a system which encourages being a tax thiefs and aids corrupts. Despite having a decent qualifications and working at a respectable position, I cannot even hope to own my own residence, giving the heft prices of apartments and houses in all major urban centers in Pakistan.

    If this system is to continue than sooner or later the salary class individuals will also need to be given the option to voluntarily file the tax, instead of the same being forcefully deducted from the salary.

    The best I can hope to do is to invest in my future generation by giving them a good education. This has also become challenging, given that almost 100% of the educational institutes have become money making for profit ventures for the owners with focus on quantity ratehr than quality. Even my son in 1st grade has to compete which children who take tuition at this early age!

    All in all a difficult period to live as a salaried person!Recommend

  • London Banker
    Feb 6, 2017 - 2:33PM

    I really laughed loudly @ world markets are in turmoil and Pakistan is doing well. These builders need to face it. The property market is dead for the next 10 years especially when it was being run off illegal money. Recommend

  • ZAHEER
    Feb 6, 2017 - 4:24PM

    Soon the balloon will burst ! Recommend

  • ayaz
    Feb 6, 2017 - 4:44PM

    WelconeRecommend

  • Ali S
    Feb 6, 2017 - 7:19PM

    @Faisal A Malik:

    You should stop whining, be a patriotic Pakistani and give income tax on your hard-earned money to our great army and politicians like PML-N who are building CPEC for Pakistan (so what if we’re not sure what exactly are we getting out of it, anything with China must be good, and more importantly, it annoys India).Recommend

  • kemosabe
    Feb 6, 2017 - 8:30PM

    @chinto:
    “Asian tiger” on the basis of what ? Buying and selling plots and property ? (which to a large extent is encouraged and run by the military). Because that’s the only business going on in the country while other countries surge ahead with meaningful productive activities and industrial growth. Recommend

  • JK
    Feb 6, 2017 - 8:38PM

    It’s a shame to read such negative comments on a positive turn of things….

    I am a Muslim of Pakistan origin living and working in USA… Myself and several of my circle of friends are in the process of buying real estate in Pakistan … Yes the article addresses our concerns living in an unsafe situation in the US… back up plans are in motion…

    My advice, don’t miss the boat!Recommend

  • Lodhi
    Feb 6, 2017 - 10:01PM

    @JK

    I guess u r right !Recommend

  • Faisal
    Feb 7, 2017 - 9:22AM

    @Faisal A Malik:
    You ungrateful whining loser. At least pay the taxes yourself, I pay my taxes since I have faith in my country. You lousy wastage of land, food and water, people like you are the lowest of the low in society: They do nothing but expect everything, even free rides.Recommend

  • Ahmar Khan
    Feb 14, 2017 - 3:45AM

    @London Banker
    I purchased some property in Karachi suburbs in 2015 and sold after 4 months. Made a profit of 3 lac rupees. I did have to pay taxes in terms of registration and transfer fees. This was before the income tax on property introduced in 2016.

    @kemosabe
    Much of the US economy is also based on Mortgage landing. The financial crises of 2007-08 was a direct consequence of housing bubble crash. Same is the case for Dubai and London.Recommend

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