The real estate market somehow is consider to be the most reliable and intelligent ways to earn good profits and building wealth in most part of the world but at the same time it is somewhat unpredictable in Pakistan. Worldwide millions of people are considering real estate investments to increase their wealth and improve their lifestyles.
In Pakistan, for the last three decades the people who have invested in real estate market have earn a lucrative profits and increase their wealth roughly tenfold but at the same time a large number of people who are inexperienced in real estate business get caught up in all of the hype and throw their life savings in the ring. Simply, the real estate has also risks, just like in other investments, so as an investor, people should be aware of all risks and opportunities go into it.
Most of the success stories of real estate people belongs to that group of people who considers it as a long term investments and not as a short term. Nowadays, real estate sector contributes a fair portion to the economy of our countries GDP because some key players of this sector i.e. Bahria Town , DHA, Naval Anchorage, Emaar , Citi Housing etc has mold people lifestyle according to the new changing trends which ultimately forces other housing developers to follow same living standards.
Before investing in real estate, there are a few factors that investors must take into consideration before embarking:
1- Location: Location is one of the major factor which mostly decides the price shifts. Simply, if the property location gives you easy access to amenities such as hospitals, shopping centers, entertainment places, educational facilities etc. then chances are that your property price will be towards the high end; whereas, the bad location could adversely affect your property price. The areas with high reported crime rate and near to unexciting neighborhood never be a priority of any investor. One good example to correlate our argument is an example of Dubai real estate market because of very low crime rate.
2- Builder’s Reputation: The second most important factor in real estate business is builder reputation. The most essential asset of any real estate company is its brand image which company can only create by delivering quality projects within the time frame given to its customers.
Brand image could be created by consistent efforts and through acquiring three attributes in builders i.e. qualities, values and strengths.
The real estate business is not as easy as most of the people think, real estate business demands consistent builder efforts against incredible market odds. Simply, if a builder has earn good reputation from its past projects than probability is on higher side that he/she could inspire and build confidence on customers. Another important factor to evaluate the reputation of the builder is his/her long-standing presence in the real estate market. There is a high dropout rate of those builders who have not delivered consistently to customers. Builder branding play a pivotal role in targeting potential customers for any upcoming builder projects. As we know the consumers are buying their dreams when they are thinking for acquisition of any property and for that they need confidence. Brands help potential customers to visualize their dreams. Moreover, if you are interested to buy a property in any co-operative housing society than credibility of management is one of the parameter before taking decision. If the sitting management is running society affairs according rules and regulations which are registered in Byelaws than chances are bright that society is progressing according to wishes of society stakeholders (members).
3- The National Economy: The health of the country’s economy also plays a pivotal role in real estate sector which directly affects the value of real estate market. The economic health of the country can be tracked and measured by GDP score, employment data, manufacturing activities, the prices of goods etc. Broadly speaking, GDP and other associated economy factors acts as a good estimator for the progression of real estate investment. In short, if the country’s economy is sluggish, it directly hearts real estate sector.
4- Government Policies: In Pakistan we have witnessed that the real estate sector has shown tremendous growth, especially in last three decades. World Bank reported that Pakistan suffers with shortage of 10 million units per annum and this deficit is guardedly growing. The same study also revealed that the estimated size of real estate sector is about $300 to $400 billion. Government policies play a trivial role in decision making process for any industry and same is true for real estate industry. It is the responsibility of the government to introduce people-centric policies which will results in finance inflows into real estate market. The initiative of Mera Pakistan, Mera Ghar (MPMG) of previous government was appreciated by majority of Pakistani people because through this scheme construction industry got boost. The key features of MPMG are listed below:
(a) Subsidized Markup Rate
(b) Available for up to 20 years
(c) Easy Documentation
(d) Financing up to PKR 10 million
(e) No charges on early payment
(f) Quick processing
With passage of time Government of Pakistan has taken many steps to reform this industry. In 2009 government introduced Finance Act 2009 which specified that an individual who has a land greater or equal of 500 sqr yard and having a flat of 2,000 square feet or more has to filing of such assets into returns. In 2010, FBR instructed provinces to collect Capital Value Tax (CVT ). Similarly in 2012, government introduced capital gains tax (CGT) through Finance Act 2012. This tax was introduced by government to discourage short term investors in real estate and no CGT was imposed on properties withholding periods above 2 years. Following this, Fiancé Act 2016 raised the advance tax on the purchase of any immovable property with a value of greater than PKR 4 million to 2 per cent for filers and 4 per cent for non-filers.
Moreover, in 2018, the government introduced the amnesty scheme for public to declare their undisclosed assets. Even though our Governments has introduced multiple policies to streamline this sector but I believe this sector is still considered to be a tax haven for ill-gotten money. The only and viable solution to strengthen this industry is to digitize the whole buying/selling process. A true E-governance system will provide a platform to investors, especially for the overseas Pakistanis to make investment in our lovely Pakistan because it will provide to highlight corruption, comfort for citizens and less interaction with the government officials.
Moreover, the federal and provisional governments should introduce web based ONE WINDOW operation where citizens can easily access and provide all relevant information before taking any decision.
As I have discussed some major factors that can affect real estate investment, especially in Pakistan and I believe that if investors understand mentioned factors then probability is on higher side they can raise their capital.
The author, Muhammad Iqbal, is a freelance columnist. He is an academician by profession and currently is engaged with Bahria University as Assistant Professor. Mr. Iqbal could be reached at Mohammad Iqbal firstname.lastname@example.org.