The 2019 real estate roundup: From lows to highs

Looking to invest in Karachi’s real estate market? Here’s what you need to know


March 05, 2020
Zameen.com
Publishing Partner

The year 2019 was quite eventful for Karachi’s real estate industry. Many remarkable developments came into being, such as the lifting of the ban on high-rise construction. The expected rise in developmental activity enticed property agents from all over the country who were eager to claim their share from the evolving market situation. Moreover, over the year there was an escalation in the number of genuine buyers interested in securing affordable residential properties scattered around the northern suburbs of the city.

On the other hand, due to the prevalent tax regime, areas where short-term investments were not deemed conducive experienced gradual price drops. In an attempt to make tactful decisions against this backdrop, investors did not only resort to making precise calculations, they also strove to anticipate which societies (or parts of them) were safe for stake holding. This often resulted in major price fluctuations in different sections of the same housing schemes.

In order to understand these trends in full, let's glance over Zameen.com’s statistics that were collated over the course of the year.

Most popular areas for residential plots 

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Based on the figures, Scheme 33 scored the first position, as it remained the most sought after housing scheme in the city for buying residential plots in 2019 – with overall stable property rates. The price drops here were mostly recorded for the smaller plot categories due to the introduction of new real estate options in the inventory.

These statistics further indicate that Scheme 33 also fared as Karachi’s most active housing development in terms of volume of transactions. Due to various reasons, people seeking a more personalised living space continued to find the variety of housing solutions available within the scheme tempting.

Bahria Town, the largest residential project of the city came second among the most searched areas for buying plot units. This project, in fact, is responsible in many ways for the northern and northeastern suburbs of the port city now appearing much more accessible and somewhat more desirable for living than what was previously the case.

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The society, on its own, is eclectic in terms of meeting its residents’ everyday needs. Its recent addition of several leisure facilities has also helped prospective buyers to see the good side of living in Bahria Town. The rise in property demand, coupled with the on-ground development work, as well as an increased selling pressure that emerged in the society’s precincts and projects due to the pending litigation cases continued to surge property rates. This was evident, especially in those peripheral Bahria Town sections that did receive clearance from these legal issues, accounting for the price shifts recorded for the average value of 120 square yards, 240 square yards and 500 square yards plots listed in the table.

Gadap Town, which was able to secure number-three position, also underwent an extension of several new projects featuring affordable real estate units over the year; thereby generating many sound investment opportunities for long-term investors as well as genuine buyers.

The market situation, however, was not very encouraging for Defence Housing Authority (DHA) Karachi, where a considerable drop was observed in the average prices of 240 square yards and 500 square yards plots – primarily because the frequent exchange of plots here costs a considerable sum when considered in light of the taxes to be paid. Nevertheless, DHA City displayed the most stable progression and witnessed only marginal drops of 2% and 3% in the values of 240 square yards and 500 square yards plots, respectively.

Most popular areas for houses

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The 2019 trends for popular house-buying areas in Karachi narrate a different story. A plethora of the city’s established housing schemes nestled at the top-three positions. The table’s gradual increase in house rates indicated a solid demand over all. At the same time, the price drops for 240 square yards and 500 square yards properties in Gulshan-e-Iqbal Town are indicative of the market having favoured smaller housing units. Due to the existing demand factor, modest price appreciations were observed in the value of 240 square yards houses in both Gulistan-e-Jauhar and DHA.

The residential properties available in Gulistan-e-Jauhar and Gulshan-e-Iqbal Town can be used either for apartment construction purposes or can be sold by investors as refurbished houses; considering both the schemes’ return on investment is quite rewarding. In 2019, the houses in DHA also elicited a solid market response due to their tempting rental yield offers.

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A stark variation in the price numbers recorded for different house sizes is observed in the table figures for Bahria town Karachi. The average value of a 120 square yards unit here rose by 23%, while a 500 square yards unit experienced a huge drop of 33%. The price appreciation for the 120 square yards units was mostly accounted for by the property units located in the scheme’s areas and projects that had been cleared of all legal issues. Due to some uncertainty attached to their futures 500 square yards units experienced price depreciation.

Throughout 2019, Bahria Town remained in the news for multiple reasons. It not only launched the Central Park Apartment project, but also announced to resume the Bahria Town Nawabshah project. The debut of Bahria Town Peshawar at the start of 2020 was another reason why Bahria Town gained immense popularity in the news. Bahria Town management also offered various options for people who had investments stuck in their project precincts where the development work had been put on hold due to legal constraints. In addition, it also started dispatching notices to people to clear their dues that were pending under various heads, including possession charges.

Most popular areas for renting houses 

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As an observed principle, the local rental market does not fluctuate much with a drop in property demand among buyers in established city locations. In fact, rental prices tend to rise by 10% annually when there are no major changes in the on-ground situation. Overall, it is this market dynamic that determines a property’s rental yield. High demand among tenants, of course, also leaves a positive impact on the market rates of such properties.

Based on the statistics, Gulshan-e-Iqbal Town remained the most popular area among buyers looking to rent a house in Karachi in 2019. Rental yield percentages, however, were the highest for 120 square yards houses in DHA and Gulistan-e-Jauhar – the two societies ranked at the second and third table positions, respectively. For bigger-sized units, i.e. 240 square yards and 500 square yards houses, Clifton, placed at the fifth position fetched the highest ROI figures at 3.69% and 4%.

Most popular areas for buying apartments 

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Gulshan-e-Iqbal Town, Gulistan-e-Jauhar and DHA were the three locations most searched for by people looking to buy apartments in the city. Owing to the addition of new units after the construction ban waiver, the average prices of two and three bedroom apartments in Gulshan-e-Iqbal Town rose respectively by 15% and 13%. The price of a three bedroom unit in Gulistan-e-Jauhar, in contrast, dropped by 5% due to the excess in supply.

At the same time, prominent rises of 19% and 13%, respectively, were registered in the values of two and three bedroom units in DHA Karachi and North Nazimabad. The escalated demand for apartments in Bahria Town was reflected in the prices of the scheme’s two, three and four bedroom apartment units.

Most popular areas for renting apartments

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Tenants exhibited their own preferences when it came to renting apartments in Karachi. Overall, 2019 had Gulshan-e-Iqbal Town, DHA and Gulistan-e-Jauhar figure as the top-three most popular areas among tenants looking to rent suitable flat units within the city. Quite interestingly, these apartments offered better rental yields when compared with houses located within the same localities. The rental yields of apartments in Clifton, as listed above, might not appear impressive, but this was due to their high market prices.

The verdict

All of the above figures indicate that investors selected areas and localities with high genuine-buying activity in the hopes of scoring some solid returns on investment. Major factors such as taxes, as well as the considerations of rental yields and future developments were the prominent elements prevailing in the investors mind for the purpose of risk avoidance.

Further, 2019 also saw efforts being made in Karachi to regularise the linked processes of the construction and public launch of high-rise buildings. The unfortunate incidents of dilapidated residential buildings collapsing and the consequent debates on their poor constructions in the absence of any proper regulatory oversight raised many questions on the performance of various concerned government authorities. At the same, the city’s major operations against land encroachment also caused considerable public panic – with sincere efforts now being made to resettle the affectees and to close all the monitoring loopholes referenced.

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In January, the Supreme Court ordered the Sindh Building Control Authority to share the city’s new master plan draft with its benches and issued the same order to the Karachi Metropolitan Corporation later in mid-2019. For this purpose, a separate committee was formed in January 2020; with consultations with experts currently underway who have suggested that the provision of suitable transport facilities and the construction of high-rise buildings needs to be planned meticulously.

On the issue of transport facilities (expedited, as mentioned, through the apex court’s involvement), several projects are currently in the pipeline – with most of them being developed under the China-Pakistan Economic Corridor (CPEC) initiative. These include the Mass Rapid Transit System (covering the Green Line, Orange Line, and Red Line projects), the revival of the Karachi Circular Railway (KCR) project, and the extension of the Karachi-Hyderabad Motorway M-9 (also known as the ‘Super Highway’ – the de facto transportation lifeline for all the housing schemes located along and close to the route).

The mass rapid transport lines, in addition, will link the localities situated in the northern parts of Karachi; promising a gradual and consistent rise in their property values. Further, the city administration has planned a network of roads and signal-free corridors, flyovers and underpasses to address the city’s incumbent traffic issues. The revival of the KCR is also expected to help take the load off the roads by giving people a much more affordable and safe commuting alternative.

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Commenting on the city’s real estate progression, Zameen.com CEO Zeeshan Ali Khan said, "Uncertainty and confusion almost always come coupled with the new reforms and laws introduced by any government. The first couple of months after the fiscal budget was announced saw a similar outcome. People waited for the new laws to completely unfold before making any major decisions regarding their property investments. With the dust surrounding the matter later settled, and with the introduction of the amnesty scheme, transactions in the real estate sector picked up speed as expected. Investors' trust in the government, thereafter, has continued to increase; reflected prominently in the launch of new projects".

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Addressing the overall condition of the property marketplace in the country, Mr Khan added that Karachi's market was ripe for investment – with the current scenario being “nothing less than ideal” due to its overwhelming domination by genuine buyers and investors. He added that these individuals do not have to navigate their way through artificially inflated price figures any more since the market is more suitable for long-term players.

Mr Khan believes that a positive trend is to continue in 2020, He expects that local and overseas Pakistanis will continue to invest in the real estate market; with both their motivation and ROI figures rising further in the wake of the 2020 fiscal budget. This dynamic will not only bring more foreign exchange for the government, but it will also help the country's real estate sector thrive and grow in the right direction.
 

COMMENTS (1)

Saad Baig | 2 years ago | Reply

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