Political conditions, high costs hamper real estate investment

Investment mostly going in small plots, prices of big plots fall.

FAISALABAD:

A significant decline in foreign investment and worsening political and economic conditions are keeping investors away from the real estate sector.

As if problems like high interest rates and rising inflation were not enough to hamper investment and curtail the purchasing power of people, a massive fall in foreign investment and the changing political scene have further made conditions difficult for investors, industry people say.

In four months (July-October) of financial year 2011-12, foreign direct investment dropped by 60 per cent as compared to the same period last year.

Mahmood Ahmad, a property developer, told The Express Tribune that investors and purchasers were only buying small plots in new residential colonies being set up in the city.

He said owners of big plots were not finding customers and the low demand pushed prices of property down.

“For those who want to own their own home, high interest rates and four per cent tax on transfer of property, besides other charges, are major impediments,” said Nauraiz Khan, another property developer.

He said the real estate market was experiencing a slump as property prices in almost every society had stood the same for the last three years. “Political instability with volatile law and order situation is preventing investors from making investment in property, instead they are keeping their money in banks.”

Saleem Ali, a real estate investor, recalled the time when property bought one day gave significant return the next day, but “changed circumstances have destroyed the business”.

Five years ago, investment in real estate was considered one of the most profitable businesses, especially the commercial property, he said.

Haider Khan, another real estate investor, was of the view that residential and commercial real estate business was risk-free and advantageous. “Property trade in Faisalabad was always a good option for investors as it produced instant profit, but now investment in property blocks capital,” he said.

Investment in residential areas is facing a slump while farmland is getting attraction and receiving investment as well. High prices of construction material and other heavy expenses have also increased the cost for investors, in turn making it difficult for ordinary people to purchase a house.

Published in The Express Tribune, November 22^nd, 2011.