Pakistan’s real estate sector has proven to be a significant factor in the socioeconomic development of the nation. In actuality, the State Bank of Pakistan reported that “the combined contribution of housing and construction in the country’s GDP has continuously been higher than 9pc” in its first quarter report.
Investing in real estate typically takes a lengthy time and large quantities of money. Although there are excellent gains, there is also a lot of danger involved in this type of transaction. The benefits of property investing rely on a number of variables influencing Pakistan’s real estate market, which we will explore below.
Principals Affecting Pakistan’s Real Estate Market
Consider some of the most crucial elements influencing Pakistan’s property market performance before moving forward with your real estate investment.
- Increased Consumer Affordability,
- Demographics,
- Interest Rates,
- Investments by Pakistanis Abroad,
- Budget, and Taxation
IMPROVED CONSUMER AFFORDABILITY:
Along with rising property values in Pakistan, consumer affordability has also seen a sharp increase in recent years. The surge in new businesses, alternative employment options, co-working spaces, and freelancing in Pakistan are primarily to blame for this rise in consumer affordability. Consumer affordability, which is always rising, has increased demand for both residential and commercial properties, particularly in cities. This is not the situation in rural areas, where affordability has not changed much in recent years.
DEMOGRAPHICS:
Any country’s demographics are important to consider when selling and buying property. The partition of the population has a significant impact on both the value and demand for homes in Pakistan. The joint family system and the separate family system coexist side by side in Pakistani society at the moment (in which individuals start living separately after getting married and having children). A separate family can easily fit in smaller, house sections and apartments, whereas people who live in extended or joint families need a larger space.
A PRICE RATIO:
The ability of the individual to purchase real estate is significantly influenced by interest rates. Even a small adjustment in interest rates can have a significant impact on real estate market patterns, particularly in Pakistan. Since the majority of homebuyer in Pakistan rely on obtaining mortgage loans from banking organizations or choosing real estate projects with alluring payment options.
What precisely drives these fluctuations in property interest rates, then?
Interest rates on real estate and other sectors ultimately fluctuate because of Pakistan’s stock market, which is highly volatile primarily due to the country’s shifting economic and sociopolitical conditions. High loan rates typically cause the affordability graph to decline.
OVERSEAS INVESTMENT:
Pakistanis who live abroad have historically invested heavily in the Pakistan real estate market.
The Naya Pakistan Housing Schemes, which are now being built in a number of Pakistani towns, as well as the newly emerging ultra-modern residential communities and housing schemes in Gwadar, including Golf City, both have a significant potential to draw in foreign investment.
One of the many initiatives included in China’s massive Belt and Road Initiatives, which will soon make Gwadar the largest free port in the area, is Golf City. One of the massive initiatives included in China’s massive belt and road initiative which soon make Gwadar of the largest port in the area is golf city.
TAXTATION & BUDGETING:
The Pakistani real estate industry has changed significantly during the past ten years and has weathered numerous economic shocks. The new government has adopted new taxation policies for immovable assets in the form of the Budget 2019–20 in order to promote real estate investment and eliminate irregularities impeding the growth of the real estate sector. Here are some of its main features:
- On movable property, the withholding tax (WHT) rate has been lowered from 2% to 1%.
- Regardless of the property’s market value, withholding tax (WHT) must be collected at the time of acquisition.
- Withholding tax (WHT) is collected on real estate sales where a 5-year holding period is maintained.
- Removal of the prohibition against non-filers buying properties with a market worth of at least PKR 5 million.
When investing in real estate in Pakistan, you should be on the lookout for property scams in addition to the aforementioned factors that affect the real estate market.
For more information contact Aura Properties, we provide free consultancy & available to assist you regarding any Real Estate query.
Research & written by:
Sanah Abbasi