How Karachi Operation Changed its Property Landscape

Karachi’s real estate market has seen many twists and turns over the last few years. The Karachi Operation has had an interesting impact on the city’s realty market. This piece will be looking at trends before and after the operation to get a better idea of its impact.

The period of 2008 to 2011 was not a particularly good one for Karachi—or the world, in general—not only because it was the period of a severe global financial crisis, but because Karachi itself suffered from severe law and order issues. This, for example, is how the residential property prices fared between January 2011 and January 2012:

While at the beginning, the prices for residential property were slightly above PKR 4,700/sq ft, they dipped soon afterwards, and did not recover until year-end.

It was around this time, that the Supreme Court heard what has been termed the “Karachi Law and Order Case”, and as a result issued directives aimed at resolving Karachi’s security woes. Partially, at least, it was this directive that served as the impetus for the Karachi Operation that began in September 2013.

By December 2016, more than 100,000 criminals had been apprehended in Karachi as a result of the operation – the property market saw increasing improvement too. This was how the residential property prices changed 2012 onwards:

As may be noted, the property prices jumped almost three times in this duration, from PKR 4,654/sq ft to PKR 12,689/sq ft. As may also be noted, the steep rise actually began somewhere around mid-late 2013. It was, indeed, around this point that operation to improve the law and order situation in Karachi began, and since then, prices have only been increasing.

A minor blip can be observed in mid-late 2016, when the new tax regime was introduced by the current government, which naturally affected the property market throughout Pakistan. Moreover, ever since the beginning of 2017, Gwadar and CPEC has also affected the property market, where investors, in particular, have turned their focus to Gwadar. This, in turn, has also added to the interruption of the steep growth of prices in Karachi.

However, as can be seen, it hasn’t had much of an effect on Karachi, except that prices stabilised instead of growing for a while. When the taxes were introduced, people were, all of a sudden, wary of how things might turn out; hence, the cessation of the growth. However, once the things settle, it will be business as usual once again.

Similarly, while Gwadar may have become the centre of everyone’s attention this year, Karachi is bound to bounce back because of the factors that have always made it lucrative.

Meanwhile, Bahria Town, some argue—and perhaps correctly so—is, indeed, a more profitable investment for many people that are opting for it instead of Gwadar. Similarly, though DHA City is not at the top of its game at the moment, it is a brand that people trust and like to invest in – long-term investments here should pay off.

As they see development, both projects will also see a rapid increase in prices. Moreover, both Bahria Town and DHA City, when they have sufficiently developed, are expected to cause a ripple effect and result in development around them. For instance, new projects are already popping up near both these societies and this trend will only continue. Some of this can actually be observed from the graph of residential property prices this year below, as the property prices have gone from PKR 11,800/sq ft to PKR 12,689/sq ft:

Tips for Investors

When asked about it, there was a mixed response by the people familiar with Karachi’s property market. While some did think that the focus on Gwadar has, indeed, affected Karachi’s market, others believed it was business as usual. But the numbers do show that Karachi’s market has been affected.

If you have already invested in Karachi’s market, hold your property. The prices will rise. Bahria Town’s prices are already rising and there isn’t much fear of their fall, according to my sources. Though DHA City’s prices are falling at the moment, the fall is basically because of how overblown its prices had been earlier, so that is just the market adjusting itself. Once the development has picked up pace and the market has adjusted itself, DHA City would see a rise in prices again too.

Meanwhile, the potential investors looking at Karachi’s property market could benefit from similar advice: Bahria Town, as I explained above, is potentially a more enticing investment right now than even Gwadar. Moreover, for genuine buyers too, it would be one of the best options in Karachi.

DHA City, on the other hand, is suitable, at the moment, for genuine buyers, or investors who can afford to hold property for a relatively long time—say a year or two. If you could hold for three, you wouldn’t have to worry about Capital Gains Tax either.

Would you be investing in Karachi? Do you have any information or opinion to add to what I have written or perhaps some questions? You are welcome to comment below.