Why investors are ditching Pakistan Real Estate
In the last decade, Pakistan's real estate sector performed exceptionally well as property prices are being doubled approximately every five years. This abnormal growth was due to the huge capital inflow in real estate. But now prices are cooling down across the country as things have changed. The year 2019 brought a bad omen for the realty sector as it is hard to find investors in the market. Here’s why investors are ditching Pakistan Real Estate.
Real Estate Scams
According to NAB, there are numerous illegal housing schemes in Pakistan. People have lost their life savings due to widespread real estate scams. Many frauds have been reported in well-known housing schemes. Gwadar real estate frauds are the hot talk of every town as developers sold out the societies without having land. Due to these frauds, investors are now very cautious. Many of them have diverted their investments to other sectors.
High-Interest Rates
The increase or decrease in interest rate has a huge impact on real estate. Low-interest rate increases the investment in the realty sector whereas the high-interest rate decreases the capital inflow. Pakistani interest rate now stands at 10.25%. The high-interest rate has declined property investments. This is because people are getting more profits on fixed deposits from banks. The capital flight from real estate to banks is the major cause of property price decline.
New Property Laws
Pakistani Government has introduced many property laws in the last budget. According to the new property laws, firstly, non-filers can’t buy a property worth more than 5 Million PKR. Secondly, foreign Pakistanis have to send money within 60 days before the property transfer. Thirdly, registration authorities will be fined if they process the files of non-filers. These laws have diverted investments away from real estate.
Property Valuation Rate
On 1st February 2019, FBR raised the property valuation rates in 20 cities across Pakistan. The rise in rates has made the real estate transactions expensive due to which volume has decreased. The day trading has almost ceased. Property valuation rate rise has slowed the market. Now only genuine buyers are purchasing properties whereas investors are moving to other sectors.
Black Money Crackdown
The real estate sector is generally considered a safe heaven to park illegal money. Pakistani realty sector that once thrived on black money is now in decline. People can’t hoard properties beyond their incomes because NAB is acquiring the sources of income. Due to the ruthless accountability, investors with black money are afraid of losing money.
Pakistan Real Estate Market Watch
Pakistan Property Market is almost dead as there are very few buyers in the market with white money. Without black money investments, Dubai property prices have declined by 75%. The same is happening in Pakistan as the market is adjusting to the new purchasing power of buyers with white-money. Due to low transactions, many property dealers have closed their offices. Realtors claim that if property laws are not changed, real estate prices will fall by 40% in 2019.
