When it comes to home ownership, most Pakistanis appear to prefer buying land and building the home themselves rather than buying a readymade house, according to data compiled by real estate website zameen.com.
Real estate is an asset class that the vast majority of people feel they are experts in, which is somewhat remarkable considering the fact that there is very little data available on the subject. For the first time in Pakistan’s history, however, one company has tried to compile data on the real estate market in Pakistan.
Zameen.com is probably the largest real estate website in the country and has been tracking listings on its website since 2006. It has decided to release some of its data through a report, and has offered an exclusive sneak peak to The Express Tribune, which we present today to our readers. The data is taken from listings and searches on zameen.com for the first six months of the calendar year 2012, and covers some of the largest cities in Pakistan.
The insights offered are somewhat surprising. The data suggests that almost 61% of the searches on the zameen.com website are for empty plots of residential land, as opposed to houses. Residential real estate inquiries themselves amount to about half of the total inquiries on the website, with the remainder focusing largely on commercial and industrial real estate.
While the 61% number may be skewed slightly, owing to a larger volume of inquiries from real estate developers, it nonetheless does suggest a clear pattern: despite the advent of large residential developments made by real estate companies, a significant proportion of Pakistanis still prefer buying the land themselves and having their homes custom-built.
Part of the reason for this may be traditional: people like living in a house that they themselves designed, or at least had significant input in designing. But at least part of the reason may also be economic.
Data from zameen.com suggests that the difference in the average price of a house and an empty plot of land is substantial. A one-kanal (605 square yard) house in Karachi, for instance, will cost the buyer an average of Rs33.8 million, according to zameen.com’s database. A plot of land of the same area will cost approximately Rs14.5 million, leaving the buyer with Rs19.3 million to build a home according to their own needs and still come up equal to the average price of a house. It might even be possible to build a house for less and pocket the difference as savings.
The data from zameen.com has some limitations. Since it is an online database, it skews towards wealthier, higher-priced neighbourhoods. Fewer people in lower-priced neighbourhoods buy and sell real estate over the internet. Nevertheless, the trends it highlights offer useful insights to people seeking to buy a home as well as people looking to invest in real estate.
For instance, there are some significant regional variations between cities as well as significant differences within each city itself. The existence of these differences is intuitive, but they have never been quantified before. The first report offers a limited snapshot of prices at one time and only covers a few cities. Over time, more data is expected to become available, including a comparison of prices over time, which would help buyers of real estate answer the age-old question: by exactly how much do real estate prices appreciate over time, and does that make real estate a good investment?
The current report also highlights one more interesting trend: prices per square yard in most cities are, broadly speaking, higher for smaller plots than they are for larger ones. There is, however, one exception: prices of a 300 square yard house or plot tend to be the lowest on a per square yard basis, in virtually all cities across Pakistan.
Published in The Express Tribune, October 8th, 2012.