Profit rate in feb further decreased beside already decreased in jan of national savings , good time for property again starting ??
National saving profit rate decrease means?..gov has more money and does not need money from ppl, so decreasing profit ? OR gov wants to give less to depositors and more for its own pocket?
Any how in either case ppl can divert the money to some other business ,property etc.. Resulting in property price increas
THIS can also be secondary to IMF filling the kachkol +decrease crude oil prices internationally ,and also further decrease in prices of crude oil import from KSA for NS as a favor(ALLAH knows the best), so probably some good feelings in economic terms.
BUT yes the rates are low enough to uplift the property sector.
BUT what about the banks profit rates and lending rates?have they decreased as well????
Investment in property has always been a fruitful investment opportunity. I’m not very fond of National Savings.
Current rates for national savings are a laughing stock,you can hardly get 700rs a month against 1 lakh investment unless you are a pensioner,and it definitely lures genuine investors to look for some other mode of earning,so this particular reason will definitely give its shared growth in property investment,
Minimum deposit rate of return has been reduced by 1% to 5.5% by all banks starting 1st February. National Savings have also made a similar reduction in profit rates and for some products, they have reduced profit rate by even more than 1%.
Lending rates have also been revised and prime borrowers are being offered loans even at the rate of KIBOR + 2%, which comes to about 10.5%. The environment is now conducive for real estate from a monetary stand point, but the taxation measures may create obstacles. Its like serving some one a hot cup of tea but with a dead fly in it.
National Savings are useless anyway. The real power of deposit money decreases quickly and the return on that money is eaten up as well. Property and Construction are one of the best investment, probably the only good investments in Pakistan. Prices of property will increase now.
@Junaid. Lets hope so. There is no doubt that money has started moving out of the banking system. Its just a question of where it ends up. In Pakistan, there are typically 3 most common options, stocks, FX and real estate. I am sure all three will get benefit, but hard to predict when the tidal wave will strike each of these markets.
National savings has gone too low almost 8% exclusive of the 10% WHT. Not worth investing. I think PIBs have good rates around 11-12%
Stocks: Manipulated and Artificial with not much future stability (Politics/Security/FDI/Gov Policies etc)
FX: Again unstable, Oil prices too low and that might help but if you see China and the West have a slow down in their growth and demand. Our inflation is also going down. Besides, most people can't handle the stock market and eventually search for other places for investment.
Real Estate: It's been very down since the past year and it's about time it goes up again. Since there are not many other places to invest for better returns, people will move money into real estate.
@Raza. Do banks finance buying houses only or can they finance buying plot also, in an established area like DHA, Bahria etc.?
Both investments options are of different types of people. National savings attracts more to pensioners and Govt; servants.
on other hand property investment is of generally business persons interest.
this decrease in profit will not effect too much on prices of property. If property will move now then there will be other factors.
Mostly Profits in real estate are more than every other saving schemes.
@Awais. To answer your question directly, NO, banks do not finance purchase of plot ONLY. They can however finance it as part of a package.
For example if you are buying a constructed house, the bank financing does not differentiate between plot and house price and you get financing against total price.
Similarly, if you take out financing for house construction, Bank can pay for up to 50% of the cost of the plot. The remaining amount will be for construction.
Please do take note that Banks do not finance any purchases in Bahria due to issues with land ownership. However if you do have a plot with proper registry, though there are very few of them, then Bank can finance that even in Bahria.
Raza Sb can you please clarify this BT land ownership thing… I have heard this from a few people but still can’t understand it completely. Aren’t all private societies dealing like that? I mean do other societies also update government registry along with their records whereas BT only updates its records but not government registers? How does it work? Thanks
@Junaid. There is no rule of the thumb as such and the situation varies from one project to another. Even in Bahria, a few people in phase 1-6 were able to obtain "fard", but that has now completely stopped since 2010. In most private societies though, I think the situation is same i.e. They do not transfer actual ownership, so you need to make sure that the owner is a reliable entity, but either way such areas are not normally eligible for bank financing. There are however a few exceptions., depending on a case to case basis.
On the other hand, Cooperative societies and Military societies are legally delegated powers to undertake land transfers on behalf of the revenue authority so there is no problem over there.
Thanks a lot Raza Sb… This is quite a serious thing I think…
@Raza. Thanks for the very useful info. I think some of these private schemes can be identified through their names. Their names Usually end with the words TOWN, CITY or ENCLAVE.
EXCEPT for when they are owned by a known legal entity, such as CDA Park Enclave or DHA City. But then again, it is not the project name but the entity which owns the project that gives it legality i.e. CDA, DHA etc. So its better to check about the project ownership before investing in a project with these suffixes, to minimize risks.