Globally, the real estate sector has evolved tenth-fold and Pakistan is of no exception. According to World Bank, real estate investing in Pakistan contributes around 60-70% ($700 billion) of the country’s wealth.
Some sources suggest the value is more than $ 1200 billion. It highlights the efforts of Real Estate Developers in Pakistan.
Well, estimating the real value of the real estate is difficult as 80% of the wealth is undocumented. In a report by the State Bank of Pakistan, the combined contribution of the construction and housing sectors to the GDP of the country has been consistently more than 9 percent for the last decade.
Hence, the prime hurdles faced by the Real Estate developers are negatively impacting. One of the hindrances to economic growth is inflation, which has been controlled by the real estate sector of Pakistan. Though it has improved; dropped from 26.6% to 23.8%.
Now, let us understand the due role of the growth of Real Estate Market in the light of stabilizing the economy. Real Estate Investing plays a vital role as a hedger to retain Pakistan’s currency and controls the negative impacts of inflation on the currency and the economy, as a whole.
Well thanks to the real estate developers of Pakistan. Many builders and developers have taken the initiative, including Citadel 7, for transforming the landscape of Pakistan, especially across urban cities.
Eventually, Real Estate Investing has recorded an evolvement in the Industry.
Real Estate Investing in Pakistan… gets Less-challenging
Well, it’s wrong to say that Pakistan lacks scope and potential for real estate, but we cannot ignore the struggle and hurdles. The most-ignorant role is being played by the government… making poor policies and strict regulations.
From property taxes to project completion plans, each one of us, the stakeholders of real estate, has been facing such challenges and barriers that have also been reflected in investors’ sentiments.
However, these are a handful of the challenges that are being under-controlled, thanks to all those measures being practiced throughout the real estate sector of Pakistan.
Heavy Property Taxes… not for all the Properties
The government of Pakistan has levied/implied heavy taxes on specific properties, especially the ones with a value of more than 5 million. If the purchaser is a non-filer thus, then the taxes are too high and the process gets too complicated.
Furthermore, registration under the federal board of revenue is also a must, which hinders the public and investors alike, investing in long-term investment projects. Even the banks are reluctant to give incentives, strategic loans, and favorable policies.
Now, turn the table, and you will find some relaxation, the trend of capital gain tax (CGT) has started showing favorable patterns. So, if you invest in a commercial or residential project, your investment will be treated like these;
- 15% of CGT will be payable in the first year and 0% from the next year.
- 5% of CGT for a property with a holding period of between one to two years.
- 0% of CGT where the withholding property period exceeds more than two years.
Unfriendly Interest Rates… Not any more
A genuine evaluation of Pakistan’s economic, social, and political scenarios shows the revolutionary hits to the stock exchange market. It is significantly pushing the interest rates upward. Hence, the real estate in Pakistan is viewing unimaginable changes.
Such unfriendly or unpredictable interest rates have left our real estate market in a state of jeopardy. Till the interest rates were not stable, potential investors used to remain reluctant.
Luckily, the interest rate in Pakistan is regressing; on October 10th, 2022, the central bank of Pakistan maintained its key policy interest rate at 15% – to slow down economic activity, a fall in the rising rate of inflation, and a current account deficit.
Loss of Investor’s interest… Now, it’s Gaining back!
Due to some unethical practices, like non-existent properties; no land Verification; unavailability of digital plans; poor location; unsafe investment options; unapproved properties; no forecasted returns of investments; and inconsistent project timelines lose investors interest in investing in real estate.
But not anymore… authorities like LDA, CDA, KDA, RDA, and others are becoming proactive, even real estate builders and developers are also actively promoting their approvals and achievements. We, Chakor Ventures have also been in the race of sharing every other minor detail of our latest commercial project, Citadel 7, right from land verification to weekly updates.
Points to Ponder
Here is a quick recap!
Hence, you are willing to invest in real estate in Pakistan. So there is positive gradual impact of regulations implemented by regularity bodies. Pakistan is lucky, to have relaxing policies, like low interests, favorable taxes, digital plans, and scam free projects that are approved by government bodies.
