The three major cities: Rise and fall in property prices

Owing to the huge population of Karachi, the demand for new houses is continuously on the rise.

ISLAMABAD/ LAHORE/ KARACHI:

Islamabad is believed to be the most expensive city in Pakistan, mainly due to the people living there. The real estate prices of Islamabad reflect the wealth of people, though the market is stuck and plummeted around 20% in Capital development Authority (CDA) controlled sectors, other housing societies like Bahria Town and Defence Housing Authority (DHA) are still providing opportunities to people to earn profits.

Unlike Lahore, where the market is going through a correction phase, the real estate market of Islamabad-Rawalpindi is on the rise. The trend setters are the same as in Lahore: DHA and Bahria Town. Real estate experts of Islamabad said that the dip in prices in CDA sectors began six months ago when the construction of a new airport terminal and ring road in Rawalpindi was announced. Before this, the real estate market of Islamabad was outperforming, adding more than 100% gains especially last year, when real estate boom was hitting almost every mega city of the country, said Shehzad Ahmad Khan, a real estate expert.

Khan further said that till 2010, they were looking for buyers to purchase land in different sectors of Islamabad, but those were very few. In late 2011, the market started gaining momentum and in 2013 it outperformed the rest of the markets. For instance, the price of a 1 kanal plot in G-13, which was around Rs3 million, touched Rs6 million in the market: a 100% increase before it dipped 20% and is currently around Rs5 million.

Similarly, in one of the most expensive sectors of Islamabad, S-11, the average price of plot of 1 kanal rose from around Rs22.5 million a few years ago to Rs35 million, an increase of around 55%.

On the other hand, DHA Islamabad and Bahria town are still providing opportunities for investors. The average land price of DHA Islamabad, according to Zameen.com − an online portal − increased 81% in the first 10 months of the current calendar year. The average price of one kanal of land in DHA in October was at Rs10 million, which was around Rs5.5 million in January 2013.

Similarly, the average price of one kanal of land in Bahria town Islamabad-Rawalpindi posted an increase of 131% in the first 10 months of 2013, up from Rs6.5 million in January to Rs15 million in October.

The upward trend in these two societies started some six months ago, and after the general elections, prices rose around 30%, said Major Tariq, chief executive officer of TM Associates, a real estate agency.

Experts cite fewer alternatives for investment and migration especially from Khyber-Pakhtunkhwa as primary factors that affect prices in these two areas and other small and medium scale societies in Rawalpindi in general.

LAHORE

The real estate market here is enjoying a rather healthy growth, in sharp contrast to the property bubble that burst at the end of 2005, wiping out huge investments made by people and investors, market players say.

Lahore is witnessing a major infrastructure development phase as the Punjab government kicked off mega projects, especially the Lahore Ring Road.

According to property dealers, the idea of gated communities is appealing because of law-and-order problems, encouraging many real estate gurus to launch such projects at the best possible sites.

Migration from smaller cities has increased the demand for rented houses in gated communities and other localities, which has triggered construction activities and supported small and medium-scale developers.

Since 2010, when investor confidence started reviving after the end of property boom in 2005, land prices in top societies have increased more than 100%. The Defence Housing Authority (DHA) is taking the lead as pieces of land in phase-6 and phase-7 are the most sought.

In phase-6, price of a one-kanal plot, which was on average around Rs7 million in 2010, touched the Rs18-million mark, an increase of 157%. In the current correction phase, the prices have come down by around 20%.

“On average, the increase in the price of a one-kanal plot in DHA is 36% for the first 10 months of the current calendar year,” according to zameen.com, an online property portal.

Average prices in January this year were around Rs10.3 million, which rose to around Rs14 million in October.

“DHA cannot be compared with other societies, but it doesn’t mean that real estate prices in other parts of the city are static,” said Rashid Chohan, Managing Director of Chohan Estates.

Prices in Gulberg and other parts increased according to the market trend, but these days the market was undergoing correction, which was a healthy sign, he said.

Several housing schemes, no matter whether they are private or being developed under the Lahore Development Authority, have seen an increase. According to zameen.com, price of a plot of one kanal has increased 30% on an average in the first 10 months of 2013, standing at around Rs12.1 million.

Real estate experts believe this trend will continue despite some correction. The Lahore Ring Road project is going to play a major role as construction of its southern loop will lead to development of new commercial and residential ventures.

KARACHI

For builders and developers, the first five months of the PML-N government have proved quite satisfactory as they have supported the continuous rise in property prices over the past one year.

The city, which saw instability because of frequent target killings, is fast returning to normalcy and this relative stability is positively impacting property prices in different areas.

Owing to the huge population in the city, the demand for new houses is continuously on the rise. In the absence of a fresh census or reliable data, it cannot be stated how many houses the city needs and how many it produces every year.

However, according to officials of the Association of Builders and Developers of Pakistan (Abad) – an association of over 700 builders and developers – the city sees at least a 4.5-5% increase in population every year. This means Karachi adds 1 million people every year according to its current population of around 20 million.

The builders divide the city into three divisions – north, central and south. For them, the south comprises posh areas, the centre is too congested and the north has huge land for high-rise buildings that can cater to the demand for people looking for flats in the range of Rs1-3 million.

Unfortunately, the areas in the north have faced increasing violence, discouraging builders from investment. For instance, areas like Gulistan-e-Jauhar, Scheme 33 and Super Highway have remained tense in the last five years.

“Property rates in Scheme 33 have dropped up to one-third of their prices due to security issues, that’s why I have abandoned my projects in that area,” commented a top builder who requested anonymity.

Though the drop in property prices was unfortunate for many, it gave a boost to the demand for property in relatively safe areas like the Defence Housing Authority (DHA), areas administered by armed forces and housing schemes with boundary walls.

“Violence in some areas has forced people to shift to safer places, causing a surge of up to 250% in property prices in secure or posh areas in the last three years,” CITI Associates CEO Muhammad Shafi Jakvani commented.

However, with the gradual improvement in security conditions, the affected areas are regaining their past glory.

According to Abad Senior Vice Chairman Saleem Kassim Patel, property prices in Gulistan-e-Jauhar, which has one of the biggest clusters of flats, have strongly rebounded in the last one year. If the price of a flat was Rs2 million a year ago, it has bounced back to Rs3.5 million because of a better security situation.

Published in The Express Tribune, November 25^th, 2013.

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