By: Prof. Abdul Shakoor Shah
The Real Estate industry in Pakistan was instigated from Karachi. It subsisted even before partition. Property tycoons constructed buildings but selling of plots was atypical. The industry started progressing in the 1950s and DHA came into being. In 1960, plots in DHA achieved some boom. The industry was making headway from 1970-1974. ZA Bhutto launched the Amnesty Scheme and the market boomed till 1977. The catastrophic deluge in DHA and post-election insurrection doomed the industry till 1982. The Afghan war brought a bulk of finance to the market from 1982-1988. The sudden death of the then president halted the industry from 1988 to 1992.The market lingered leisurely from 1992-1994 and caught its next thrust from 1994-1997. The market suffered a recession from 1997-2001.The industry got its major boom after 9/11. The upturn broke all the past peak records. The gigantic price hike brought forth the money mongers in early 2000s. The next recession toppled the market from 2005-2010. The market retook in 2012 until 2015. The patterns of market trends remained the same for 43 years out of its 69 years. The boom ratio is 4 to 5 years. The proportion of price increment in urban areas is 4 to 5% and for rural areas it is around 9 to 10 %. During recession the prices in urban areas fell from 0.5 to 1 % and in rural areas it is almost 5%. Globally, the real estate industry normally follows a stable escalation rate of 5 to 8% yearly. However, in Pakistan it observes bullish trends. The numbers jig up to 40 to 60% growth rate annually.
The year 2016 was an extremely promising one for the industry as in 2015, outlay in residential property boosted by 5 to 7 % while commercial property saw a boost of 15 to 20% across Pakistan. The Federal Budget 2015-16 brought much needed tax relief to the sector until 2018. Customs Duty on the import of construction machinery was also abridged to 10%. FBR data and industry surveys guesstimate industry growth is worth more than $700 billion. The industry accounts for roughly 2% of national GDP. It not only spawns a high level of direct employment, but also excites stipulate in more than 250 subsidiary sectors. Pakistan is the most urbanized nation in South Asia. If the bucolic to metropolitan exodus persists at the existing rate, the metropolitan area is anticipated to touch 95.62 million by 2025, taking the urbanization level to an unprecedented 53.3%.
The trend of buying luxury apartments has increased nearly 7 to 9% during the last decade. Therefore from 2010-2016 apartment prices were boosted by 120%, while houses registered were 80%. Pakistan has a housing surfeit of almost 12 million units. Even more astonishing is that for an industry that had been registering double-digit growth since 2010, with new suburban projects proclaimed almost weekly, more than 50% of the metropolitan population lives in slums and squatter settlements that lack basic necessities. Only 1% of the housing units developed yearly to 68% of total population, consisting of people monthly income is mere Rs 30,000. On the other hand, almost 56% of housing units target 12% of the population, comprising individuals with a monthly income of Rs 100,000 or above. The mortgage rates are still considerably higher compared to the region: Hong Kong (2.15%), Japan (2.7%), China (7-8%) and India (8-12%). The real estate seems dispatched to Mount Caucasus. The Property in Cheap parts of Islamabad during early 1980s, for a house 1500 sq ft in G sector was $10,000. In a decade it tripled to around $30,000, then in the 2000s it tripled again to $100,000 and now it’s around $200,000 at least for the same old house in decrepit shape. So the price in the previous 30 years has risen 20 times. This is unimaginable anywhere else in the world. In the USA after the 2008 Housing bubble burst, the house prices came crashing down but over here it is quite the opposite. COVID 19 played a vital role in the economic slowdown of the whole world and affected the sector gravely.
The worst of all is that money-mongers and no professional unbridled financial tycoons have made the industry a cradle of corruption, land mafia, land grabber and blackmailers. The black giants have even grappled with the state via real estate. The big bangs of real estate are choking the state machinery by influencing state policies. The mafia of the real estate sector is much more powerful than the rest of the branches. They have set up charity institutions, trusts, and print and electronic media houses to get rid of the state and even blackmail the state. They are also inflicting the state with severe threats like water shortage, decrease in agriculture, price hike, land grabbing, black money, smuggling and other illicit means of hampering state powers.
The writer is Prof. in English and columnist based in Lahore. He can be reached at: [email protected]