Pakistan’s property market has turned out to be a major contributor to country’s socio economic development. In fact, according to a report released in the first quarter of the year by the State Bank of Pakistan, “The combined share of housing and construction in the country’s GDP has been consistently higher than 9pc.” Property investment is usually long-term and involves huge sums of money. The returns are great but this sort of transaction also entails considerable risk. Rewards from property investment depend on a number of factors affecting the real estate market of Pakistan, which we shall discuss below.
In light of the latest property search trends, we can see the country’s overall property market has remained more or less stable. The data accumulated over the last few months suggests only a minor drop or rise in the real estate markets of all major cities in Pakistan.
Key Factors Affecting Real Estate Market of Pakistan
Before going ahead with your real estate investment, take a look at some of the most important factors affecting the performance of Pakistan’s property market.
- Increased Affordability of Consumers
- Demographics
- Interest Rate
- Investments by Overseas Pakistanis
- Budget and Taxation
Increasing Affordability of Consumers
Not only property prices in Pakistan, but the graph of affordability of consumers has also shot up over the past couple of years. This increase in consumer’s affordability is mostly due to rise in start-ups, new types of employment opportunities, co-working spaces and freelancing in Pakistan. Being constantly on an upward trend, affordability of consumers have resulted in greater demand for residential as well as commercial properties, specifically in cities. However, this is not the case in rural areas as the affordability in such regions has not witnessed much change.
Demographics
When it comes to the sale and purchase of property in any country, its demographics play a vital role. Same is the case with Pakistan as the properties in demand here and their value are greatly affected by the division of population. Currently, there are two family systems running side by side in Pakistani society: the joint family system and the nuclear family system (in which individuals start living separately after getting married and having children). People living in extended or joint families require larger home as compared to a nuclear family, which can easily accommodate in smaller, independent house portions and apartments.
Expressing his views on the extended or joint family system, which is still intact and preferred by most of the Pakistanis, Zameen.com’s CEO, Zeeshan Ali Khan said, “The joint family system creates huge demand for larger homes, even if incomes are smaller, because in Pakistan children do not usually move out when they turn 18 but continue to live with their parents even after they get married. For this reason, the average home size in Pakistan is larger than many developed countries, and they see sustained interest from buyers and renters across the board.”
Interest Rate
The individual’s capability for buying a property greatly depends on the interest rates. Especially in Pakistan, even the slightest change in interest rate plays an imperative role in terms of real estate market trends. Since most of the homebuyers in Pakistan rely on taking property loans by financial institutions or go for real estate projects that have attractive payment plans to offer.
So what exactly causes these fluxes in property interest rates?
Pakistan’s stock market that fluctuates rapidly, mostly due to the changing economic and socio-political condition of the country, ultimately causes the interest rates on real estate and other sectors to go up and down. High interest rates usually bring down the graph of affordability. The lower the rate of interest, the higher the demand for property market of Pakistan.
Investments by Overseas Pakistanis
Investments made by overseas Pakistanis have always played a vital role in the country’s property sector.
Some on-going major developments that have great potential to attract foreign investment include Naya Pakistan Housing Schemes that are being constructed in multiple cities of Pakistan and the emerging ultramodern residential communities and housing schemes in Gwadar like Golf City.
Golf City is one of the many projects that come under the umbrella of China’s Massive Belt and Road Initiatives, which is about to turn Gwadar into the region’s largest free port.
Budget and Taxation
Over the last decade, the property market of Pakistan has evolved substantially and has absorbed many economic jolts. To encourage property investment and eradicate irregularities hindering the progress of property market, the new government has introduced new taxation policies for immovable properties in the form of Budget 2019-20. Here are some of its key highlights
- The rate of withholding tax (WHT) has been reduced from 2% to 1% on immovable property.
- Collection of withholding tax (WHT) on the purchase of property, irrespective of its market value.
- Collection of withholding tax (WHT) on sale of property, where the holding period is kept up to 5 years.
- Withdrawal of restriction on purchase of properties having PKR 5 million or above market value by non-filers.
Along with the aforementioned factors affecting real estate market, property scams is another phenomenon for which you should keep an eye out while making property investment in Pakistan.
However, Zameen.com, the country’s biggest and most reliable property portal, is doing an excellent job by helping people thoroughly explore the overall real estate market and finding them ideal homes as per their requirements. It is one of the best ways to connect with reliable property agents and land into an effective property deal in Pakistan. On a lighter note, here is our blog that provides you a guideline of using Zameen.com in an effective way to fetch the best possible results.
A lot is happening in the realty sector these days and if you want to keep track of all important developments related to real estate in the country, keep following Zameen Blog, Pakistan’s best property and lifestyle blog.
