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Real estate business slumps as rates remain stagnant in 6 years

LAHORE – The four percent tax on transfer of property, banks high interest rates, rapid policy change, ever-soaring inflation and political instability in the country have kept the dealers and land developers away from real estate business, dealers said.

“There is slump in real estate market as the rates of properties in almost every society are same for the last six years. However, there is some exception in DHA and Behria Town where situation is comparatively better as prices are inching up there during last two years, said Tayyib Khalil associated with Property Express.

According to him, domestic real estate sector is facing tough time as banks do not prefer to lease properties owing to economic destabilisation. He stated that political instability together with worse law and order is discouraging investors to take risk in investing property, forcing them to keep their money in banks on up to 14 percent markup.

Sometime ago, investing in real estate was considered one of the most profitable businesses, especially commercial property, he added. He said that the returns were undoubtedly high before 9/11 incident, as the prices hike almost on daily basis.

“One day you bought any commercial property and the next day its value increased. You only needed to be careful about the location, high quality construction materials and the market rate of particular property that you were going to purchase,” he said. He said that commercial as well as residential real estate business was risk free and profitable. The property trade in Lahore was always a good investment option, as this property could generate immediate cash flow for the investors, while its value could also increase by many folds.

Currently, all depends on choosing the right commercial property in the right area and buying it at the right time. This business has also become risky as compared to other investment options due to expansion of roads in city as huge portion of several properties come under expansion in many areas.

The societies facing slump included Wapda Town, LDA Avenue, EME Society, Punjab Govt Society, Izmir Society, Johar Town, Valentia Town, PIA Society, NFC Society Tariq Town, Abdalian Society, UET Society, PCSIR Society, OPS Society, IEP Society and Safpak Society.

He said the high quality of materials used in the construction of new societies is attracting the buyers, resulting into high profit margin of investors as well as the developers. In new societies, the chances of fraud are less since people hardly ever buy the property before thorough investigation.

Qaiser, CEO of Qaiser Estate, Wapda Town, viewed that presently the new phases of DHA and Behria Town are attracting buyers more because they are comparatively less expansive, he added. He observed that currently in Defence phase 6 and 7, the new homes are being constructed rapidly due to modern town planning. Here roads are comparatively wider and are being constructed on European pattern. He said that now the peoples’ trend is towards those societies which are at prime locations, particularly if they are near airports or close to the Ring Road interchanges, he said.

Ch Aslam, the owner of Shalimar Real Estate at Multan Road, pointed out that poor economy, bad political conditions and stock market crisis are impacting the investment in property business. He said that external factors like global economic crunch and tense border situations are also badly affecting the real estate business. He maintained that illegal occupation of properties is another major factor hindering foreign investment in Pakistan.

He said that once the property market was considered one of the best field for investment, as after the 9/11 incident, there were a lot of people from the US as well as the Europe, looking forward to invest in Pakistan real estate business. In congested urban localities to capture plots, having multiple commercial real estate options in mind, including erecting hotels and offices is also profitable but not booming presently.

He said that in surrounding areas of the city like, Sheikhupura Road, Multan Road and Raiwind Road, there is no new investment in industrial properties. Same is the case with the office spaces in different urban areas that could be occupied for some business activity, but here is also very low investment due to dull activity.

Mushtaq Sulehri, who deals in property for the last 30 years having office in China Scheme, said that here are only small plots with a view to build houses. He said due to unemployment and hyper inflation, purchasing power of people is low. Resultantly, low demand of properties has reduced properties’ prices.

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