Political drivers are responsible for the pricing in Pakistan’s real estate industry, worth around $350 billion.
The district collector’s (DC) property valuation rates and the State Bank of Pakistan’s interest rates are rarely discussed in the economic literature.
With a consequent decrease in real estate prices globally, there is no sign of a decline in property prices in Pakistan.
In addition to the recession, many of the countries in the world are facing a similar situation in that their economies are in recession and the economy will likely take years to recover.
The mounting inflation, low returns, stagnant growth, and magnifying unemployment are a few of the worries.While real estate is selling for less than it should, prices are skyrocketing. This proves how the economy is currently struggling.
On the contrary, supply is created to attract demand at a later stage.What’s special about real estate? Here we have to diverge from pure economic analysis to socio-political dynamics.
In Pakistan’s real estate market, realty companies manipulate business practices, take political interventions, use social standards, promote culture and follow illogical crescendos.
As plots are exchanged on the market, prices rise without being driven by demand.How much emotional buying goes into a purchase is considerable.The end users want a safe home for their families.
They make their buying decisions based on their pious emotions for their loved ones.People who want to buy a low-cost house tend to manage their budgets for an ultra-modern, spacious house.
It’s compelling them to borrow. This is how we allow our socio-cultural patterns to influence the recurring process of real estate price determination.The speculation of off-ground plot files does two things — promoting the cash economy and initiating the complex real estate price determination process.
These plots are often traded in the market. Real estate tycoons set a trap for price hikes.It’s easy for a file to get too many hits, which causes it to become oversold.You’re right, the first payment has already been made, but the prices keep on increasing.
Nobody knows about the DC property valuation mechanism.
Pakistan’s population is growing at a rate of about 2 percent a year, which is impacting property demand and pricing.
In fact, the insane increase in price is not commensurate with actual demand.
Therefore, the relationship between population increase and housing demand in Pakistan hardly fits into the case of Pakistan.
Investors are willing to pay the ‘unreal’ value of cryptocurrencies despite their eroded real incomes.
Let’s take the UAE as an example.
1.While Dubai property sales volume was $
2.4bn in 2019, it increased by $600m to $
3.7bn in
In Pakistan, the pandemic has brought some serious disruption to the market, but property prices either rose or frozen.
Real estate doesn’t bring down the value of money.
Perth was the most expensive state for houses, apartments, and other realty assets in 2007.
The rental rates are sky-high, the mining slowdown brought them down.The country’s Bureau of Resources and Energy Economics reported around 9 percent decline in revenue from the export of minerals in 2013.
Many coal and iron mine workers lost their jobs, and companies stopped investing.
This led to a long-term decline in the prices of real estate, which eventually increased after this.In Pakistan real estate prices have no power to decrease, in spite of the lowest economic growth in years.In times, people do not have savings to invest.
The market suffers from high demand, but the prices are keeping on going down.Real estate and construction companies Attracting customers with similar valuations seems to be a useful strategy.
Some people have criticized this practice, claiming that it’s a scam. But this practice is no more than the financial exploitation of real estate investors.The setting up of a Pakistan Property Institute could help regularise the real estate sector.
To get the fair share of the pie, institutes like the one I have spoken about would need to devise a fair mechanism to ensure logical fluctuations in real estate prices.The process of digitising an industry can bring a positive change.
There would be no price determination of real estate inventories by socio-political agencies.Removing unregistered companies from the real estate sector must be considered to prevent them from getting involved in the real estate sector.The author is a socioeconomic analyst and founder of Real Estate Research Centre Pakistan.
Email: waheedurrehmanbabar@gmail.com
Source: Dawn, The Business and Finance Weekly