People shift money from banks to real estate to dodge FBR

Prices of one-kanal plot have increased by Rs4m in some city areas.

Shahram Haq July 27, 2013
"Investing in real estate is the most common way to protect capital as well as earn a hefty monthly rent," F-1 Properties CEO Waseem Tariq. ILLUSTRATION: JAMAL KHURSHID


As Lahore offers what real estate buyers find a safe and secure investment avenue, largely due to a stable law and order situation, plot prices are touching the sky in some areas, increasing by a whopping Rs4 million in just a month.

People are increasingly pouring money into real estate leading to a sharp rise in prices following the access granted to the Federal Board of Revenue to bank accounts of depositors to search for potential taxpayers, market people say.

Land prices in the provincial capital have been on the rise for years. Previously, the price increase was much steady, but for the last one month, prices have gone up at an abnormally high pace.

Defence Housing Authority (DHA) is once again leading the surge followed by Bahria Town.

This comes despite the fact that DHA Islamabad is facing a case in the Supreme Court and the order of freezing its accounts has created uncertainty among investors in the city, causing a fall in land prices there.

The case has not disturbed land prices in DHA Lahore and investors are continuing to buy real estate in different sectors of the society.

According to market people, the price of a plot of one kanal in DHA Phase 5 ranges between Rs16 and Rs26 million, an increase of Rs4 million compared with prices a month ago when they stood at Rs12 to Rs22.5 million. In some cases, however, land owners are demanding more than Rs26 million.

In Phase 6, the price of a one-kanal plot ranged between Rs9.5 and Rs15.5 million a month ago and now stands between Rs11 and Rs18.5 million, an increase of Rs1.5 to Rs3 million.

In Phase 7, average increase in plot prices is between Rs1 and Rs2 million as the price of a one-kanal plot stands between Rs7.5 and Rs13 million. Previously, prices were between Rs6.6 and Rs11 million.

“The major reason for the increase in real estate prices this time around is the decision of the government to allow the FBR to check bank accounts of the rich. Following this, people are shifting their priorities and purchasing land in Lahore, preferably in DHA,” said Mian Talat, CEO of Talat Enterprises, a real estate agency.

The easing of monetary policy, in which the State Bank cut the discount rate by 50 basis points to 9% in June, also played some role in encouraging investment, he said.

Despite the abnormally high prices, Talat is certain that the market will not crash in the near future. “The reason is the same, better law and order situation and infrastructure facilities than the rest of the country. Prices all over Lahore rise but not as much as in DHA,” he added.

The other society that has benefitted from the real estate boom is Bahria Town Lahore.

Prices of a one-kanal plot here have increased by Rs3 to Rs3.5 million in one month as they are in the range of Rs11 to Rs16 million compared to Rs8 to Rs12.5 million earlier.

The price increase in other parts of the city is comparatively lower. In Johar Town, price of a one-kanal plot is between Rs7 and Rs30 million, depending on the location. Very few blocks in the area saw the price hike in the past one month with the highest increase of around Rs1 to Rs1.5 million. The trend was similar in an adjacent society.

“Real estate is a safe haven for investors and we hope that this trend will continue,” said Ijaz Ahmad, a real estate expert.

“In the last two weeks of Ramazan, many overseas Pakistanis come back home to celebrate Eid with their families. This is the peak time when majority of them buy plots in different societies for investment purpose,” Ahmad added.

Published in The Express Tribune, July 28th, 2013.

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