Pakistan’s real estate market is the pillar of the economy; it is most one of the most fastest growing sector of our economy. Land, who owns it, where it is located all end up being critical factors in where wealth is concentrated and where human society will organize itself. According to the World Bank estimate, the size of a country’s real estate assets constitutes between 60 and 70% of the country’s total wealth; if these estimates are applied to Pakistan, the estimated size of the real estate sector would be $300 to $400 billion.
Despite the gloomy outlook of the real sector, there were compelling facts initially that indicated that the 2020 year would have been encouraging for the investors, especially for the overseas Pakistanis. Among the promising factors which painted encouraging pictures for the real estate sector were supposed to be the boom of the tourism industry.
Unfortunately, the effects of COVID-19 pandemic hit the world with a dramatic force- The quarantine, lockdown, travel limitations, and network disturbances affecting the worldwide economy, which spiraled on downturn fears. The real estate industry, which was booming for several years and was particularly supposed to grow in Pakistan hit rock bottom too.
History of Real Estate Market of Pakistan:
Pakistan’s real estate market has never been consistent and has experienced severe toll over the years, courtesy amendments in laws and tax regimes. The year 2015 brought some good news to the real estate sector of Pakistan as the prices were high and was increased demand in housing facilities. Many investors and realtors joined the bandwagon to make high profits. The prices of not just plots and houses were increased but the era gave boost to the prices of flats and apartments resulting in high sales and many people accessing to basic living facility, i.e roof over their heads. The situation remained the same till mid of 2016 and it gave confidence to all the investors to invest huge amount of money and it the market was boosting higher profits. But all the dreams built by the foundation set by previous year were made of dust.
Especially, 2017 brought downsizing to the market. All the progress made in the previous year due to tax redemption on construction materials and reduction in tax rates went down the drain. Most of the investors started disposing of their properties to avoid withholding taxes and other duties levied upon them. The situation instigated the investors to protest as they refused to accept the following tax regimes. Fortunately, the industry has seen some good signs, thanks to awareness, control over terrorism and digitization. What the developed countries experience din the first decade is being seen in Pakistan now.
Underlying Challenges Post Covid:
Of the many sectors drastically affected by the COVID-19 outbreak, none may be feeling more uncertainty than the real estate market. Around the world, the ensuing lockdown sent office workers to work from home, and social distancing made it virtually impossible for letting agents to show properties to residential buyers.
The recession in the past years had the realtors and investors to go through enough but the current another huge obstacle. Recovery of the past recessions took several years, and comparing it to the current situation; we should be prepared for ups and downs in the market. The construction developments have been delayed, and many offices are closed due to which the transferor purchasing of properties has become impossible. It is a tough time, and the economy can only be stabilized once the COVID-19 hits off.
Steps taken by the PTI government:
Considering the challenges and situations presented by the outbreak of Covid’19, real estate sector remains of utmost importance for our government of Pakistan Tehreek-e-Insaf. The budget presented by the government in the National Assembly estimated an increase in the growth by 2.1 percent. However, if we go by the inflation rate suggested by the government, the GDP is expected to decrease by 4.5 percent. As per the words, speeches and on paper work, government aims to stand up to the socio-economic challenge by reaching out to the vulnerable segments of the society and business community to neutralize the negative impact of lock down, lack of basic living facilities and cherry on top, unemployment.
The government is giving “relief in taxes on the income on sale of immoveable property (real estate),” Federal Minister for Industries and Production Hammad Azhar said while unveiling the budget in the National Assembly.
There will be no tax on the income emanating from the immovable property if the buyer sells it after four years from the date of purchase. “The maximum (duration) for availing tax exemption is being reduced to four years from eight years,” he said.
Besides, the rate of capital gains tax (CGT) on the sale of property will be reduced by 25% each year. The CGT is charged at the rate of 20% if the profit on sale is Rs20 million or more in the first year from the date of purchase.
Under the regime announced by the Prime Minister Imran Khan for the construction sector, this is expected to be achieved by 2021.
– Construction has been given the status of industry.
– The investors or realtors will not be questioned as for source of funding for projects.
– Tax to be levied on per square foot / per square yard basis.
– All withholding taxes will be removed on materials except for cement and steel.
– No withholding taxes on services except those rendered by companies.
– Builders and developers can take credit of income / profit from project up to ten times of tax paid.
– To further facilitate the development of affordable housing projects, the tax on low cost housing projects to be further reduced by 90%.
– Families to be provided exemption from Capital Gains Tax on one house.
The new measures were made applicable to new projects starting before December 31, 2020 and are open to existing incomplete projects who opt for taxation under this scheme.
Future Analysis of the industry for 2021:
Keeping the uncertainty of the global economic conditions amid the outbreak of corona virus and in particular the unpredictable conditions of the real estate market of Pakistan, it is highly hoped that this market will boost in the coming years following many projects under development or to be developed.
Of the many projects, CPEC is one of the most significant project which will bring infrastructure, energy and agriculture growth in Pakistan. Moreover, China-Pakistan Economic Corridor (CPEC) has already cruised into high gear in 2021 gaining traction in the potential areas that constitute modern future of Pakistan. According to a report, it is suggested that the involvement of Chinese in country’s construction market will be positive in the shape of timeliness and implementation and will continue to enhance the growth of the construction industry in the near future. The significant economic zones of CPEC are yet to be established, however, the benefits of CPEC can be seen with improved power situation and partial completion of the Lahore-Karachi motorway.
Role of Digitization on Real Estate:
Pakistan is one of those counties that have adopted digital and modern trends way too late and similarly the real estate sector lags in the digital race. However, gradually the role of IT and related platforms are taking turns and are proven to be of great help. Platforms like Landtrack.pk do not only make the entire process of buying, selling, renting or any other activity related to real estate convenient and advanced but safe as well.
Today, it is being observed that more and more people are signing up with the real estate portals to avail respective benefits but this trend is mostly confined to the major cities of the county, i.e. Karachi, Lahore and Islamabad. Nevertheless, considering the response of people towards online property search, it can be expected that in the looming time this digitalization will take over smaller cities as well.
Best Investment Options for 2021 in Karachi:
Like a dramatic palette of different colors dissolved together, the metropolitan center is an amalgamation of linguistic, ethnic and religious diversity, forming a unique cultural hub, offering various traditions. When you are searching for the industry to invest in it in the metropolitan city, the real estate industry remains a paramount option in your subconscious considering the benefits and returns it can offer.
- DHA City:
DHA has attained a valuable status serving as a benchmark for providing unparalleled living standards in Pakistan. It is also one of the most trustworthy housing scheme that are under the administration of Pakistan Army. The pace of ongoing development work in DHA City may not appear fast to some. This is because the construction work is being carried out horizontally. Furthermore, the society covers a huge area, and the developer is determined to retain its natural terrain features.
The investment opportunities available in DHA city Karachi offer long-term returns and profits and the development of Malir Expressway further compliments the value of this area. It is expected that the returns or profit margins would return back in a span of three years.
- Gulshan-e-Maymar:
Located directly on the Super highway and several roads linked to the Liyari Expressway, Gulshan-e-Maymar is one of the most potential investment options to be developed in the following years. The master plan was drafted in such a way that every division of the society has a plethora of amenities available within a short walk or drive. The area consists of 10 sectors and have further subdivisions as well. Of the 10 sectors, Sector X makes the center of Gulshan-e-Maymar is one of the most popular sectors of this area.
Gulshan-e-Maymar has been constructed in such an impeccable way that the developers have not left any sector without all facilities and amenities just around the corner or at a short drive. Although, many people still perceive Gulshan-e-Maymar with rare population and development projects available. However, since 2019 the image has completely changed. Many investors have now balled their eyes with the price tags between 9 to 11 million. Therefore, Maymar has a lot to offer in the residential as well as in the commercial sector. We can say that Maymar will continue this potential in 2021 as well.
- Scheme 33:
The hot pie for all investors and buyers, scheme 33, previously known as the Gulzar-e-Hijri is rapidly developing and creating its buzz around Karachi. Scheme 33 is located near National highway, its southern edge runs across the Gulistan-e-Jauhar and the northern edge touches Gulshan-e-Maymar. It is an affordable housing program targeted towards the middle class without compromising on the quality and providing the modern and latest facilities. A lot of housing projects have been started not just around this area but around Karachi but scheme 33 has been able to capture the market as compared to the competitors. Another reason why Scheme 33 has made to this list is because of the increment in price tags over the years.
- Taiser Town:
Taiser town Scheme 45 is located in the north eastern side of Karachi over more than 20,000 acres’ land. It is constituted over Deh Mokhi, Deh Nangan, Deh Bijar-ji-Buthi and Deh Taiser and has a capacity for approximately 2.5 million when fully developed. This area is currently being developed by Engineering Consultants International Limited (ECIL), which is a well-reputed name not just locally but internationally. They have an experience of working in more than 19 countries of the countries, adopting the world’s finest and modern lifestyle and customizing according to the need and requirements of the town.
For a metropolitan city like Karachi, Taiser Town (Scheme 45) offers all the necessities and amenities around the area at affordable prices. From well-furnished apartments, wide roads, provision of gas, electricity and water, educational and health facilities to salons, parks, malls, restaurants, gym and all other things are covered by this area.
- Garden City:
Garden City is so far the most prestigious and outstanding project undertaken by any of the properties companies. During the past more than thirty years, after Gulshan-e-maymar, Garden City is the only other township in Karachi that has been fully developed and handed over to its customers.
In a nutshell:
Despite of the real estate sector of Pakistan growing, we still lack basic living facility as approximately 11 million do not have the roofs over their heads and the number is only increasing. With the need of basic housing facility, thus the government has to deal with the affordability problem with more and more luxury housing facilities being built making it nearly impossible for majority of the people to rent a house- let it alone buying it.
According to the promises made by PTI’s government, they are expected to construct 1 million homes in its five-year tenure. However, as it seems, it is one promise that the government seems to have taken up as its primary goals for this term. Government needs to devise long-term strategies with short-term tasks and goals to assess and evaluate the growth and progress of a project.
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