Pakistanis invest $1.2b in Dubai real estate this year

Islamabad should introduce laws to improve investor confidence: Khan.

LAHORE: It seems that investor confidence in the real estate market of Pakistan has started falling once again as capital flight to Dubai’s property market in the first half of 2014 is recorded at $1.23 billion.

“Pakistan ranked third among countries that invested heavily in the Dubai real estate market in 2013 and the trend is continuing this year as well, despite the fact that the market has remained slow for almost the entire year,” said bayut.com Chief Executive Officer Haider Ali Khan in an interview with The Express Tribune.

For Khan, who heads one of the top three property portals of the United Arab Emirates (UAE), Dubai is the most attractive real estate market for many countries, primarily due to the reforms introduced after the financial crisis of 2008. During the turmoil, many property developers had defaulted, shaking the confidence of investors.

Now, after the introduction of new laws, the real estate market is once again strengthening.

According to Khan, Indians lead investments in the Dubai real estate sector by putting $2.27 billion (AED10 billion), the United Kingdom puts $1.36 billion (AED5 billion), whereas Pakistan stands third after investments of $1.23 billion (AED4.5 billion), according to data for the first six months of 2014.

Though no statistics are out for the remaining period of the year, market experts predict more outflow of capital from Pakistan to Dubai as the country’s economy has not performed well from June to date.

The real estate market of Pakistan has remained stagnant for the last six months, however, according to zameen.com, Pakistan’s leading property portal, overall property prices have registered a spike of 8-11% in 2014.

However, the Dubai’s market, which is passing through a correction phase, managed to post a growth of 20-23%, according to bayut.com.

Reasons for capital outflow

Khan stated that due to the absence of any government-owned regulatory authority in Pakistan, many local investors opt to invest in Dubai.

“Dubai has improved very quickly after learning from the 2008 crisis, at the time there were not many laws to protect investors, as a result the developers defaulted and investor confidence dived. Now, there are strict laws to protect the sector. They have created the Dubai land department to take things under control.”

Khan pointed out that most mature real estate markets are protected by law and the Pakistani government should gradually work to introduce some real estate laws, so that investor confidence improves and practices like the Biana system – 20% to 30% advance payment – should be stopped which hurts confidence. This will help the market mature.

The government should also provide information about property laws as majority of the buyers and sellers do not know buying or rental processes, which often results in legal battles, especially in rental cases.

Khan also said in Pakistan local developers announce different real estate projects but hardly any developer completes them on time. There are many projects where investors have been waiting for years but the builders are reluctant to complete them.

“The Dubai government shifted to the Escrow accounts model, in which the government releases certain capital to the developers, deposited by the investors, for a certain project, only to ensure the timely completion of the project.”

Published in The Express Tribune, December 26^th,  2014.

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