Flourishing Real estate Sector despite Stagnant GDP Growth Rates
Pakistan is facing issues of high inflation, stagnant growth and balance of payments crisis. These problems are interrelated to the reckless fiscal policy of its government which has led to excessive internal and external borrowing and increased debt liabilities. Moreover, Pakistan is in the grip of its worst energy crisis which is hammering its industrial output. During the last five years the GDP growth rate has remained stagnant around three percent and is far short of seven percent which is required to lift the country out of poverty and fully employ its labor force. However, IMF has agreed to extend a loan to Pakistan but in turn wants its government to promise to have an efficient and equitable tax system and end the ongoing corruption. The government is trying to achieve these objectives and has already levied higher taxes on the people.
Despite, the economic challenges the real estate market outlook remains positive. The real estate prices have reached record highs, especially in cities like Lahore and Islamabad where the security situation remains intact. Lamudi Pakistan reports the increase in prices of Bahria Town about 700% and in DHA Lahore about 250% in from the lowest hit in 2005. Moreover, Lamudi predicts the construction of residential and commercial projects to go up by 15% to 20%. In addition, investment from foreign companies will increase in the real estate sector by 10% to 15%. Thus, as it can be seen the impact of the political scenario is very minimal on the properties and equities market. Pakistan has a large informal sector where people tend to park their money in the real estate sector of Pakistan and given the stricter documentation of the formal market, people are choosing to invest in this zone.
Sentiments about our economy are less severe today compared to the 2008-2012 period. However, with the increase in confidence in the real estate sector and soaring urbanization, real estate growth rate is accelerating. The government should focus on stabilizing the economy as it would further improve the condition. Other opportunities for the government include development of large scale affordable housing projects and highway properties to establish industrial estates and lastly the review of collector rates to match with the existing market value of properties. All of this combined would surely take the real estate market to a whole new level!
