Dear friends
Trying to figure out whether or not 10% typical house rent increase per annum in pakistan is justified versus the pkr devaluation per annum!
Question to the learned members on zameen as i am very bad in math?
In Jul-2005 the US$ was at Rs. 59.6
As of today the US$ is at Rs. 101.75
Time period: 9.9 years
As per my calculation the flat average devaluation calculates at 7.1 %
Am i right? If yes then the normal 10% rental increase on property is good to have!
You are right but rental income comes with a price. Tenants damage your property, there is the fear of qabza or refusal to vacate and most importantly failure to pay rental on timely basis.
You should seek rental for your own subsistence not as profit on investment.
Yes, it seems 10% increase per year is reasonable combine with the land appreciation to counter rupee devaluation as well as inflation. I have read here in forums that if you go through proper channels to rent your property and pay income tax on rental, there is absolutely no chance of qabza and kicking out non paying tenants is easy.
My bit of advice as per my experience regarding the rent thing
Always invest in the posh area…if you can afford one Kanal in a general area, buy 1/2 Marla in the high class area, if you are opting for an uninterrupted rental income. In these areas generally rent problems are less and rents are equal versus investment.
Secondly, if you are successful in finding an honest dealer for your investment, get the tenant from him as a rule. He will give you good tenant to secure more business from you.
In Islamabad, things are very different though as now the land owner is very strong than the tenant.
You can vacate your property in no time after a notice has been served.
Regarding residential property, DHAs and BTs are the best when placed beside CDA residential properties for renting.
General areas in CDA’s such as G & I sectors there are problems with the tenants as compared to F and other VIP sectors…. The posh area rule stays……..
Yes u r right in Islamabad owner is in a better situation theoretically. Practically you do face problems of non payment of rent and non vacation, however, in cda sectors there is no chance of qabza. You can give on hiring to govt. Employees and save from the troubles of non payment or vacation issues.
yes 10% increase is there but mostly tenants may argue over 5% it depends upon you. Property tax, income tax on property rental income and other expenses like renovation or repair should also be considered.
also there is unlikely a chance to get the tenant to pay at market conditions. For example if you let in a tenant at 10,000 a month and after few years market conditions have determined the rent to be say 40,000 but your tenant will keep paying you at 10% increment and only solution is to vacate.
In your analysis you are considering almost 10 years. Suppose if you consider only 3 years ago when rate was around 90 so that would give you around 4% meaning you are 6% above the devaluation rate.