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Pakistan's realty industry heading for a slowdown
Pakistan's realty industry heading for a slowdown
By Farhan Bokhari, Special to Gulf News
Published: September 08, 2007, 23:14

Islamabad: Investors in Pakistan's property market are eager to see a halt to falling prices which have continued for several months, as the country remains in the midst of a potentially turbulent period running up to its next political transition.

With elections for the president and the parliament lingering in the next few months, prices are likely to remain subdued across the property market. To some extent this is a natural occurrence.

As political uncertainty grows, indicators for business and the economy such as real estate values are bound to suffer. The most optimistic scenario overseeing Pakistan today is indeed that this phase will in an all probability just be temporary, and one which will pass away as time goes by.

But there are at least two elements which must be a cause for medium to long term anxiety if not outright concern.

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Sharp rise

On the one hand, the sharp rise in property prices in the past few years before the downturn, sharply lifted values for areas which were far from being developed any time soon.

Hence, neighbourhoods in Lahore and Karachi which are the two biggest cities, saw a sharp rise in costs even for properties which existed largely on paper and far from real life development.

Investors in such properties obviously invested on the basis of expectations for further speculative rise in prices rather than price rises being driven by real life realities. It is therefore far from certain if real estate developments that exist mainly on paper will see their fortunes improve any time soon.

On the other hand, the rush to invest in real estate has taken place without a close appreciation of the deficiencies surrounding some of Pakistan's most sought after neighbourhoods.

Basic amenities

Recently, torrential rain in Karachi, the southern port city, saw flooding along some of the most affluent neighbourhoods around the area known as the Defence housing society.

This is the neighbourhood where price rise has been among the steepest anywhere in Pakistan. But it is also a neighbourhood where basic amenities such as proper drainage of rain water remain far from adequate.

For those who want to enter the fray of Pakistan's property market with the intention of building a house for their own use, shortage of key facilities may work to deter future buyers.

While there are many reasons for caution surrounding the property market, there are indeed still the cases of some of Pakistan's savviest investors who will not be deterred from making fresh investments. In the coming months as property prices edge further down towards being bottomed up, this may indeed be an ideal time to invest even though prudence may dictate the time frame for which people may want to invest.

Reference : http://www.gulfnews.com/business/Real_Estate_Property/10152289.html

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