General elections and annual budgets usually put a damper on growth of real estate markets as investors and land purchasers are unsure about upcoming political developments and are uncertain about policies to be adopted in the new budget.
This time seems to be an exception. The real estate market of Lahore, of course with some hiccups, has continued to boom, primarily driven by investment from overseas Pakistanis, victory in elections of what is perceived to be a pro-business political party and an energy crisis forcing people to pull out money from other areas and pump it into real estate, say market people.
Though there are several housing societies in the city offering a luxury lifestyle, people place a lot of trust in army-controlled Defence Housing Authority that has now expanded to 11 phases.
Bahria Town at the other end of the city is also performing quite well, but not like the way DHA is doing. These two major housing schemes have also helped bolster plot prices in adjacent societies.
Like every year, rumours of expected imposition of property tax are doing rounds in the market before the announcement of budget, but surprisingly they have failed to stop the increase in land prices, especially in DHA.
Before general elections on May 11, land prices, however, fell by hundreds of thousands of rupees depending on the plot size and location, but the market recovered quickly after the polls and recorded hefty increases. In some phases of DHA, prices for a plot of one kanal rose by as much as Rs2.5 million.
In DHA, Phase 5 is the most lucrative area where prices for one-kanal plots reached Rs22.5 million compared to Rs18.5 million before elections, a jump of Rs4 million.
In Phase 6, prices have risen by an average of Rs1 million and stand in the range of Rs9.5 to Rs15.5 million. In Phase 7, average increase in prices is Rs0.5 million and one-kanal plot is fetching Rs6.6 to Rs11 million.
Prices in other areas including Johar Town, Wapda Town, Valencia Town, EME, Bahria Town and many more have also recorded an upward march in recent months.
In Bahria Town, average price of a plot of one kanal, which ranged between Rs6.5 and Rs9 million few months ago, is now between Rs8 and Rs12.5 million, a rise of Rs1.5 to Rs3.5 million.
“Price increase is not abnormal and we are not expecting any major drop in property rates in the near future,” says Mian Talat, Chief Executive Officer of Talat Enterprises, a real estate agent.
Genuine buyers, not speculators, are purchasing plots, especially in DHA, which enjoys excellent repute, he says.
Talat agrees that market people are talking about government slapping taxes on property in the upcoming budget, but insists that they are not taking it seriously and continue to purchase land for building homes.
“If a small tax is imposed on property sale and purchase, it will not disturb the market,” he says.
For real estate agents, the newly elected government may be a reason behind the price hike, but there are other factors as well.
“The real estate market during the tenure of previous government was also performing quite well, so you cannot give full marks to the newly elected government for the price hike,” says Waseem Tariq, another real estate agent.
He believes that overseas Pakistanis are pumping money into real estate for safe investment as they do not have more choices. Energy crisis too is forcing many people to withdraw their investments from different sectors and invest in real estate.
He expects the market to not stop here and see more price hikes in coming years primarily due to the interest of bona fide buyers this time.
Published in The Express Tribune, May 29th, 2013.
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