Pakistan Budget 2020-21 and the Real Estate Sector:
On Friday the Minister for Industries Hammad Azhar presented the budget for the fiscal year 2020-21. PTI Government claims that budget is tax free and a great achievement in current scenario whereas opposition parties have rejected the budget on accusations that it will fail to manage the financial crisis. Let’s discuss the main highlights of Pakistan Budget 2020-21 and the Real Estate Sector.
Main Highlights of Budget 2020-21:
- Luxury Property Tax is introduced on Villas and Farmhouses. In case of large houses tax will be collected from PKR 1 LAC to PKR 2 LAC per year. But for farmhouses luxury property tax will be collected from PKR 25 per square foot to PKR 80 per square foot.
- FBR will evaluate the immovable property rate to bring it par with the market rate.
- The period for Withholding Tax (WHT) on sale of immovable property has been reduced from 5 years to 4 years. So no WHT if property is sold after 4 years of purchase.
- Capital Gain tax (CGT) period has also been reduced from 5 years to 4 years. No CGT if property is sold after 4 years of purchase.
CGT Rates:
2.5% CGT on profit less than 50 LAC
5% CGT on profit between 50-100 LAC
7.5% CGT on profit between 100-150 LAC
10% CGT on profit above 150 LAC
Full CGT if holding period in less than 1 year
¾ CGT if holding period is less than 2 years
½ CGT if holding period is less than 3 years
¼ CGT if holding period is less than 4 years
No CGT if holding period is more than 4 years
- PKR 30 Billion is allocated for Naya Pakistan Housing program.
- Advance Tax on Auction of Immovable Property to be Collected in Installments
- Sales Tax on builders will be levied by the provinces at the time of the sale of property at fixed rate of Rs 50 per square foot.
- Sales Tax on developers will be levied by the provinces at the time of the sale of property at fixed rate of Rs 100 per square foot.
- Low cost housings like Naya Pakistan Housing Scheme will be exempted from all provincial taxes.
- All provincial taxes (municipal taxes, duties, fees, registration fees and transfer charges) for urban properties will be clubbed under one head and charged at the rate of 2% of the property valuation.
- E-stamping system being introduced by all provinces.
- Federal Excise Duty on cement to be reduced from PKR 2 per kg to PKR 1.75 per kg.
Good thing about the Budget:
The introduction of the luxury tax on large houses, villas and farm houses is amazing. It will discourage the large size house construction. Luxury tax will not only create the revenue for the government but will also save the valuable land for other uses.
Bad thing about the Budget:
The Budget 2020-21 has failed to increase the number of filers in Pakistan. The tax ratio in Pakistan is lowest in the world. Unless more people are brought into the tax net, Pakistan will keep on borrowing and deficit will rise.
Pakistan Budget 2020-21 and the Real Estate Sector:
The budget is claimed to be a great economic booster but it will fail utterly. Real estate and construction sectors will keep falling because of;
Economy is in free fall;
The Budget 2020-21 is just a paperwork that has no resemblance to the reality. IMF says that Pakistani economy will decline by 1.5% in 2020-21 whereas government projection is 2.1% rise. Considering the inflation at 6.5% as the target of the government, the real GDP will fall by 4.5%.
The COVID-19 and Locust Attack are enough to destroy the economy of Pakistan. Unemployment is already high. Another War with India is in the picture. Who will buy property in such an uncertain political and economic situation?
Pakistan Debt to GDP Ratio Record High;
2003 and 2013 witnessed the property booms in Pakistan. During both booms the Debt to GDP Ratio was in decline. Debt to GDP Ratio in 2003 was 50% where as in 2013 it was 65%. But now Debt to GDP Ratio is 86% and increasing. So we can see where real estate prices are headed in Pakistan.
No end users to buy real estate;
The end users are the local Pakistani professionals & businessmen and Pakistani Expatriates. The purchasing power of local Pakistanis is in decline. Whereas Middle Eastern countries have passed the law that private companies can cut 40% pay of the employees. Remittances in 2020-21 will decrease by $5 Billion, the money required to construction 1 LAC homes. In current scenario real estate crash will continue.
Hamida Ali
on said
Sir,
Ghar Ya Plot Ke Ab Kis Ko Perwah Han.
Log Tu Roti Ke Lye Taras Gaye.
Pakistan Main Berozgari Bahoot Ziada Ho Gaye Ha.
Imran Khan Ko Allah He Pooche.
ANWAAR UL ISLAM
on said
Hamida Ali
We all love Imran Khan but real issue is his cabinet.
IK is surrounded by people like Hafeez Shaikh who have no idea of the ground realities.
Budget 2020-21 is just a paperwork.
Ground reality is that Pakistani economy has collapsed and people have no work or food.
First time in history of Pakistan GDP is in negative.
Real Estate Market will recover after 2025.
Zia
on said
See this link https://youtu.be/-gdG9w9b_UU
For those who believe prices going down in Pakistan. Not sure where prices going down
zahid ali
on said
I saw mentioned video. I don’t understand who is thinking that the plot in DHA phase 8 is cheap in 2.5 crore therefore purchase the same in 2.7 crore during the historical great depression era. amazing really amazing but quite possible. In our area in Karachi, dozens of portion are available for sale, but builders didn’t succeed in selling them for the last 2 to 3 years. As last resort, builders rented those portions. These portions are not bad for end user and even 4% yearly income can be started as rent, but nobody investing. If whatever being told in this video is correct then one may conclude that new speculation cycle in that particular area is started.
Ahmad
on said
https://www.ghar47.com/2016/07/22/pakistan-property-prices-are-about-to-crash/
That was the article after that I started taking serious to Anwar Sahib suggestion. Because he was saying something completely different than the rest of people at that time. Downfall of Economy along with real estate had started way back when Imran was not even prime minister.
zahid ali
on said
Dear Anwar Bhai
In this blog, I think all are end user, who want to purchase a house in reasonable price. We are waiting for the last 3 to 4 years. Please let us know, whenever u think that real estate price would start to move upward so that we will be able to purchase on right time. Others participants including Azeem bhai opinion would also be highly appreciated.
ANWAAR UL ISLAM
on said
Zahid Ali
Pakistani Economy has collapsed.
Purchasing power is decreasing.
Property prices in Pakistan will start rising with the rise of Pakistani Economy.
Zia
on said
I could not see single reduction in price for last few years in DHA Lahore and Karachi plots. However sales is dead but price is stagnant or slightly increased.
I am not surprised to see that as holding power of Pakistani owner is much more due to cash economy. Further I see most of owner do have some sentimental attachment to property. Therefore I doubt if it will have any reduction in price ever.
Thanks
Muhammad azeem uddin
on said
Dear zahid bhai,
If you want to get financial successes then you must have knowledge to see the ADOPTION CURVE.
This rules same apply STOCK MARKET and REAL ESTATE.
You have very small amount in your pocket , however the BIG PLAYERS are river of money, so only follow river of money and put your money on it.
Never follow , GDP, CURRENT ACCOUNT DEFECIT, BUDGET DEFECIT, etc.
If you will follow then you just count potato !!
See what ZIA bhai is saying , no proce reductions at all.
Hope you have got my point what I am saying.
Secondly generate more income resources, I mean two , three even four ways, active and passive,
Then you never become think about inflation.
Toyata parado 15 million , it is expensive for me, I say very very expensive but those who are buying it is for cheap for him, because they have flow of money, that making it cheap.
Jamshed
on said
Sabr ka phal meetha Hota hai. Pakistan real estate and economy have collapsed.
zahid ali
on said
Dear Zia Bhai
In some areas, the price is surely down, like Bahria Town Karachi & DHA City Karachi. But you are right that in other areas, the price is stagnant. I know some (very few) owner who are desperate to sell their inventories are ready to sell even in 20% less price but there is no buyer. These owner may want to migrate or have some debt burden or want to change the residence/area. You are right that, we have emotional attachment with our belongings (not only property but lot of stuff), so sometime we bear loss but dont sell at right time. Now the only hope is time value of money. Great depression is ahead. So if somebody dispose off his inventory at 60% to 70% of demanded amount in 2020 or dispose off same property at 100% of demanded amount in 2024, both are same. He can take the decision if he is not prisoner of emotional attachment.
Jamshed
on said
Azeem bhai
This recession is so big and deep that all the money would be sucked very quickly. Investors are not stupid. They are very clever in money matters. Wait and see. Yes u are right money should be where there is a flow but not in a black hole.
Zia
on said
I personally know few people they have property in DHA Karachi and Lahore for years. They couldn’t sale it as no buyers for their asking price. However they are not keen to sale in loss. They have plenty of money, it doesn’t matter how long they need to hold. I asked you may get same amount even after 5 years due to depreciation of money and answer was: if we cash this money we don’t have any other business to invest so leave it in property and take risk until we may get property rise.
In general asset never deprecate in pakistan. You can example of your old car, furniture, books or any other in valuable things. You always have buyers on your buying price due inflation and currency depreciations. However in western country you always loose money on car, furniture or any old stuff and you may have thorough outside your house as no buyers.
So those who dreaming drastic reduction in pakistan property price may never see that dream come true. At least valid for pakistan.
Muhammad azeem uddin
on said
Dear jamshed bhai,
I am reading your opinion and views, I will have one suggestion brotherly for you that
CHANGE YOUR ATTITUDE
You can not make money if you think like this.
Away from.TV, and ECONOMIST,
They always talk about FIGURS, look at these people they are never be a RICH person.
Look at STOCK BROKERS, PROPERTY TYCOON, how they have money, they never talk about figures because they know how they can multiply their money, They never care which party government is coming, They are making money and making money.
Where as question of economist they are doing job some where and nothing else.
You have rights you disagree with me.
Jamshed
on said
This time the economic crisis is unique and unprecedented . There should be no misunderstanding about the massive property crash in this crisis. The property crash would be so big and severe that people would be afraid of investing in property for years. Please fasten your seat belts!
Zahid Ali
on said
The problem is that, every investor can not hold the inventory.
http://dhatoday.com/best-time-to-invest-in-dha-karachi/
The above link is the study of decade cycle, Great work by Shafi Jakwani.
This study clearly shows that price came back to 60% of highest price.
Offcourse, the investor have holding power will not sell at lowest price, but many can not have holding power. Especially those who built one house, sell it and go for another.So any inventory sold any proce less than the highest price, this selling price become the bench mark of that area. This will depend how many imvestor are desperate to sell.
Jamshed
on said
Azeem bhai,
Thanks for your comments. You are absolutely right that I have a rule and principle loving attitude not a wealth loving attitude. I do believe in making money by fair means .
zahid ali
on said
The speculation is part of economy everywhere in the world. USA national debt just passed 26 trillion USD. It took 200 years to accumulate 1st tril & 1st tril surpassed in Q4(1981). 26th tril USD took only one month (May-June2020). What stunning is the recent pace of increase. Debt was 23.5 tril on 23March2020. Debt will be double 52 tril in 2022. USA economy is collapsing while Dow Jones rebound from 18000 to 26000 recently.
All markets are running on speculation whether it is stock, real estate, oil, commodity, gold etc etc. Most of the time big guns win the race. But there is economic cycle in capitalist system. Boom & bust always come cyclical and repeat in less than a decade.
The biggest problem in capitalist system is that the billionaire wants to enhance their profit by exploiting poor people, but at the same time these billionaire have to sell out their product. Once the majority of ordinary people doesn’t have purchasing power then how can these billionaire sell their product in considerable quantity.
https://risnews.com/childrens-place-closing-300-stores
The above stores are closing their 300 outlets. This is the start. The worst may come in 2021or 2022. I am seeing a great depression ahead.
It is not true that always river of money win the race. The Lehman Brothers filed bankruptcy in 2008 having assets on 691billion USD. Lehman Brothers filed bankruptcy when plenty of chartered accounts working in the organization. Malik Riaz is not stronger than Lehman Brothers. 2020 financial crises is even worse than 2008. This is the beginning. The oil & gas sector will start to file bankruptcy.
https://risnews.com/childrens-place-closing-300-stores
The above stores are closing their 300 outlets. This is the start. The worst may come in 2021or 2022. I am seeing a great depression ahead.
The system is collapsing. How long can one run his country by taking debt. Trickle-down theory has failed. Now some economists are asking about trickle up theory, means give good wages/amount to majority of people, once they will spend this amount, the economy will run.
ANWAAR UL ISLAM
on said
Zahid Ali
In 2024 US Debt will be 45 Trillion.
https://www.usdebtclock.org/current-rates.html
US Economy in 20-25% of Global GDP.
European Economy is another 20-25%.
50% Global GDP is down so it will suck in rest of the world.
This is the major reason that CHINA has started punishing the countries that don’t obey her.
Australia has paid the price and so is India.
Just a start.
Greater Israel? Mission Impossible.
Turkish and Russian Armies are in Syria just for Israel.
US is blackmailed.
If US starts WW3, Turkey and Russia will destroy Israel.
The Old World Order (Turkey, China, Russia, Pakistan and Iran) has defeated the New World Order (US, UK, Israel, India and Arab Kings) without firing a single bullet.
Word is gonna upside down in next few years. Political, Economic and Social Changes.
Pakistan will definitely rise but after much shakeup. The next few years are very disturbing for Pakistan. Stability will come after 2025.
Ahmad
on said
Anwar sahib
Total population of Jews in world is almost to total population of Karachi. Out of 100 top richest people in world, every third or fourth is Jew. From financial sectors to technology sectors they outclass everyone. Just FYI. (God only help those who want to help themselves).
Well on different topic what is your opinion how to hedge our savings in the upcoming economic crisis. Because if something happened to our dear Dollar than it will be a collapse of world economy. One of the analyst in Russian times keep warning since long time about economic bubble is about to burst and this time it will not be the real estate but Dollar itself and NYSE.
He suggested to hedge in Gold what’s your take.
ANWAAR UL ISLAM
on said
Ahmad
BEST INVESTMENT:
Russians are 100% right on investing in Gold.
Gold is selling near to 1 LAC Per Tola In Pakistan.
By 2026 it will be selling at 5 LAC Per Tola.
So investing in Gold will out perform all other type of Investments.
WHY?
Because all global currencies are devaluing.
REAL ESTATE:
The next decade is very bad for real estate sector.
Advanced economies will witness much crash as 30% people will default on mortgage payment.
So better to think many times before investing in real estate.
zahid ali
on said
I don’t understand, in one period of time, many parties are available to purchase a property at demanded price, while in other period of time, nobody is interested in purchasing the same property at demanded price or even 10 to 20 percent less than demanded price.
May be some speculators come into the market and increases the price and went away. Once when they went away, then market depends on genuine buyers which are off course very less in quantity.
The inventories are now piling up to sell. These inventories have to be sold out to genuine buyers in the end. If no of genuine buyers who have purchasing power are more or less equal to the number of inventories, then this price will sustain, otherwise there should be some price correction. How much? Difficult to say
Jamshed
on said
Dear Zahid bhai,
You are absolutely correct. The genuine buyers should now understand this phenomenon.
Jamshed
on said
Zahid Ali,
In this crisis, I am expecting a huge correction about 60 to 70 percent down in the property prices.
Zahid Ali
on said
One of my friend asked me to invest in a house in Surjani Town, sector 5D, 84 yard double, 10 yeas old construction, in 50 to 52 lacs. He told me that in peak time, same type of houses in same area were sold upto 85 lac. The owner are desperate to sell as he needs money. Can anyone tell that really the peak price in that area was 85 lac? My question is that where are investors who want to buy any property at lowerprice in order to earn profit at later stage
ANWAAR UL ISLAM
on said
Zahid Ali
Even in Lahore people who want cash are selling properties at record discount.
Hamida Ali
on said
The Economist magazine has issued next week cover.
THE NEW WORLD DISORDER
https://www.economist.com/leaders/2020/06/18/the-new-world-disorder
ANWAAR UL ISLAM
on said
Hamida Ali
NEW WORLD ORDER AND OLD WORLD ORDER.
NEW WORLD ORDER was created by (Israel, UK, USA, India and Arab Kings).
OLD WORLD ORDER was (Turkey/Ottoman Empire, China/Qing Empire, Pakistan/Mughal Empire, Iran/Safavid Empire and Russia/Tsardom of Moscow).
Basic difference is in NEW WORLD ORDER we use FIAT CURRENCY called paper money that is worthless.
Whereas in OLD WORLD ORDER we used GOLD AND silver AS CURRENCY.
Now NEW WORLD ORDER is destroyed by the OLD WORLD ORDER.
UK, US, ISRAEL, INDIA AND ARAB KINGS ARE DOWN.
World is once again moving towards GOLD BACKED ECONOMY. Soon we will see death of dollar as dollar is not backed by GOLD. China and Russia have collected Gold to back their currencies.
India, Israel, UK, USA and Arab Kingdoms will collapse to small countries.
Whereas China, Pakistan, Russia, Turkey and Iran will see growth in land area.
The DEBT BASED ECONOMY brought the death of the NEW WORLD ORDER.
Coming years will see some wars but not WW3. Because USA is blackmailed by China with armies of Turkey and Russia in Syria.
If USA starts WW3, Turkish and Russian ARMIES will destroy Israel. A small land that can’t be defended.
The next 5 years will be very interesting as NEW WORLD ORDER WILL SINK whereas OLD WORLD ORDER WILL RISE.
Hamida Ali
on said
Sir
What will happen to Pakistan and real estate market as GEO TV today said 67 Lakh people unemployed in Pakistan.
ANWAAR UL ISLAM
on said
Hamida Ali
I think figure are more shocking than presented by GEO TV.
COVID-19 has devastated Pak Economy. Year 2020-21 will be worst in PAK History because Foreign Pakistanis are also losing jobs and remittances are low.
Pakistani Economy has collapsed. We have to innovate our economy. Made in Pakistan can be a good revolution.
So investing in real estate will yield no good results.
PAK Economy will be stable in 4/5 years but with great effort only. So then real estate will see positive signs.
Muhammad azeem uddin
on said
Zahid bhai,
Surjani town 84 sq yard double story house price never goes 45 to 50 lakh , 80 sq yard same house at 5C4 north karachi reaches 75 to 85 lakh at their pick time respectively.
Gulshan e usman scheme 33 near saadi garden drop from 55 lakh to 45 .
80 sa yard double story gulshan e usman 55 to 60 lakh , better choice than surjani town.
But this is not time to invest.
Wait and see , drink tea.
Best choice , invest stock, do business, bakery, food business, hotel, tea shop, this leads more quick multiply money
zahid ali
on said
Azeem Bhai
Thanks for updating the information. Actually agents always allure the party by quoting high peak prices. Agent was saying that just purchase in 50 lac and sell it in atlease 65 lac after one year.
Kamran
on said
@Muhammad azeem uddin
There is no residential plot of 80 sqyrds in Gulshan e Usman scheme 33. even price are not down more than 5 lacs cuz of its genuine buyer. however, Saadi Garden dropped to 1 million low but this is the perfect buying time in these societies due to its location.
Muhammad azeem uddin
on said
Dear kamran sb,
This was the typing mistake , it is Gulsah e maymer, you can buy 80 square double story from 45 to 55 lakh.
So why go to surjani, ?
Gulshan e usman 120 yard plot drop from 55 lakh from its pick now 45 lakh.
Saadi garden , not liveable at present. It is only for investor , so left it to talk.
In my opinion IT IS NOT RIGHT TIME TO BUY.
Right now property market suffering ill and treatment have started under supervision of our beloved, HANDSOME PM.
Wait for death, i mean BUBBLE BURST then those who have CASH THEY BECOME KING.
Whereas if some one think it is right time, then go and buy, My hearty prayers for them.
I dont want exaggerate ,, it is my OPINION..
Hasan
on said
Property is always expensive. One always has to stretch to buy a desirable property.
Over time, nominal property values do rise while real values may even decline.
E.g. Assume a person had a certain salary in year 1 and an apartment of his liking had a value equivalent to 8 years’ worth of his salary. After 10 years, if values are such that similar apartment costs 5 times his annual salary, then in real terms property value has actually declined over the 10 year period.
So both salary and apartment value would show a rising graph over 10 years but in fact salary rose faster than apartment price.
This would have been quite cozy if things were that simple. Then we would have had majority of home buyers expressing happiness with magnitude of property prices.
Continuing with the same example, it might be that after a 10-year span our hypothetical apartment buyer discovers that he now needs not 8 but 15 times his annual salary to buy a similar apartment. In his universe, real value of apartment has risen much faster than salary.
I fear quite a few people have experienced this reality.
Take a look at these average values for a 1000 square yards house in DHA – Karachi.
1998: Rs. 80 lacs (old) Rs. 1 crore (new)
2003: Rs. 1.5 crore (old) Rs. 2 crore (new)
2008: Rs. 3 crore (old) Rs. 4 crore (new)
2013: Rs. 6 crore (old) Rs. 7 crore (new)
2018: Rs. 12 crore (old) Rs. 22 crore (new)
If a curve is plotted, it’ll be seen to be rising at a low gradient up until 2013. Afterwards, it rises steeply. Salaries were not rising that fast and the real value of properties were racing ahead out of reach of white money.
And then it reversed. Wasn’t a sudden reverse; it takes time for such phenomenon to become visible. E.g. values reached a peak in 2016 and builders kept building at a frenzied pace even beyond that. However, sales were slowing down. Soon we had too many empty high rises and empty houses – specially in posh areas of city.
The investors were still glued to the highs of 2016. But the buyers became increasingly more scarce.
With hindsight one could say that this down market had begun before Corona, before FATF, before Benami laws, before those milestone JITs, before NAB activism, before FBR income documentation drives, etc. But of course, these other actions all have been contributing in further squeezing black money out — which was always present but had reached new heights after 2013.
Now as much as investors and agents would like us to believe that its business as usual … but it is not.
Case in point: Someone I know had an offer for his 1000 square yards old house in good part of DHA – Karachi for Rs. 17 crores in 2016 – consider it an above average offer given values prevalent then. But such was the hype then.
By 2019, few bids that came in were at Rs. 12 crore level.
And now … there are no serious bids at all. Very vague bids are ranging from Rs. 7 – 8 crores and that too with a big maybe.
Based on this case, for this particular friend of mine, the paper value of his property has experienced a 45-50% decline counting from peak of 2016. Or one could say, values have roughly receded to the levels of 2014 or even 2013.
No buyers still. Means values may even fall to 2010 levels. Either that … or they could stay stagnant for several years, amounting to the same thing.
This phenomenon would not be applicable to every property in Karachi or even DHA. Even now, certain 1000 square yards houses in DHA have fetched Rs.30 crore but such cases are few and far apart. By & large it’s pretty much a downward journey.
The slide becomes unevenly visible over time – in some areas first, and in others later. Obviously plots suffer first and then settled areas. My feeling is that going forward – even beyond corona crisis – black or grey money would not be able to play a dominant role in property. So you’ll increasingly see values like:
For DHA 500 square yards houses – Rs. 4 crores
For DHA 1000 square yards houses – Rs. 6 – 7 crores
That’s like saying values are correcting to white money level or maybe to the level of around 2010 – ten years ago! Not for everything under the sun …but for a whole lot of real estate.
Investors & agents will continue to claim that market is rising but that won’t hide the numerous high value apartment complexes all over Clifton – that still sit empty after many years of completion. They will continue to sit like that for years since there are very few white money people with Rs.3,4,5 or 6 crores to invest in such apartments. Not sure what will ultimately happen to them. Because they won’t reduce prices beyond a certain point and white money end buyers in sufficient numbers are simply not available at those price points. And mortgage industry does not really exist for the most part as it does in the West.
DHA property prices are more flexible and there the downward slide becomes more visible.
All of this is pretty massive adjustment of values to long term mean trend line. And that line is way flatter than what agents would have you believe. Values are being pulled back to their real levels. Not everything would become cheap – as I said one always has to stretch for property – but the general level of prices appears to be adjusting to a new reality where white money would perhaps dictate most of the market – as opposed to the situation in Pakistan sometime back where 80% of market was wildly swayed by black money. Given this overall trend – and notwithstanding the many bumps along the way – property shall likely become more reasonably priced (albeit always ‘expensive’) for a greater number of white money people in the years to come.
ANWAAR UL ISLAM
on said
Hasan
Thanks a lot for you input to the ongoing discussion of Pakistan Real Estate Market.
Situation is even worst in Lahore.
Lahore is facing the real issue of end users that are hard to find.
In Lahore 5 Marla or 125 SQ YARDS Houses and 10 MARLA or 250 SQ YARDS Houses are not attracting the end users.
I know many houses where sellers are not getting even the construction cost.
Housing are in the market for more than an year now.
Ahmad
on said
Nice analysis by Hasan.
Those who bought property for investment purpose. Here is brief analysis
Year. Property price. USD. Gold/ounce
2017. 10 crore (eg). Rs 106. Rs 120000
2020. 10 crore. Rs 167. Rs 290000
So even property price remains same, value of property has already been devalued by almost 20-30% because of currency depreciation. And we know very well that property price of 10 c now is almost 5 crore at this point. So those who bought property for investment purpose or to hedge their savings they are doomed ( don’t wanna say this word but its a reality).
Zia
on said
Good analysis by Hassan and it is correct theoretically but practically in pakistan no one will sale in loss unless he is desperate due to financial problems. Most of people will hold it for another 5 to 7 year by that 1 kanal house in DHA Karachi will make sense at price of 7 corer due to rupee devaluation, high construction cost and inflation. Therefore you will be lucky if you could find any deal 50% or 60% lower then 2016 price.
I know few people personally they are trying to sale 500 or 1000 yards house in DHA for last two year and could not find any buyers but they still not willing to sale on lower price as they have no other opportunities to invest cash.
I myself observed I can’t see any increase in plot prices in DHA phase 8 Karachi but not drastic reduction as well so conclusion is I can’t buy now and I may not buy even after 5 year, however I am earning overseas 🙁
Jamshed
on said
Zia bhai,
The current economic crisis is so bad that people will forget the 2008 recession. I am expecting huge reduction in property prices by 60 to 70 percent. Now the question is not whether the seller would sell the property at reduced prices , the point is the price fall. U know if the fall in prices stay for longer time that becomes the real value . At that point, people would sell their properties at reduced rates. U remember the 2008 recession . I bought a commercial plot in DHA at 50 lacs which was sold at 115 lacs in the peak time in 2006. This recession is more severe and deeper. In my opinion, people will have to sell their properties at reduced rates.
Hasan
on said
It is true that people would tend not to sell at a loss. However, this would be based on an assumption that everyone is always financially stable, which is never the case.
Basically, the following two factors determine how an individual behaves at a specific point in time:
• His financial condition
• The phase of life he is in
So yes, agreed that for those who are fairly well off and do not have any other pressing family changes occurring, they would simply sit on an owned property and hope for better times.
How many people are like that? Well, they are there in some numbers at least.
There are probably no scientific studies on this, but based on personal anecdotal observation, one may suggest a possible distribution for a particular point in time – focused only on that class of people who own or invest in areas like DHA-Karachi, Clifton, etc:
• 20% of them would have no financial concerns & no pressing family issues – They would tend to hold on to property for several years
• 20% people would be financially well off, but there would be changes in family (e.g. death of a patriarch & children would want to divide property after it is sold off) – They would tend to sell in near future.
• 20% people would have mild financial troubles, but no family issues – They would try to hold off as much as possible.
• 20% people would have serious financial problems and on top of it would also be going through some destabilizing phase of life (death, divorce, immigration, old age) – They would be prime candidates for selling even at a loss.
• Remaining 20% people would also be distributed somewhere on this overall continuum.
In generally bad economic times, these percentages would change a bit with relatively heavier weight towards people with selling intent.
As I said, this is not at all scientific but may be a depiction of real life as experienced by many people.
What this translates into is that just like there would always be some people unwilling to sell at a ‘loss’, there would also be others who would be at opposite end of spectrum. So given the meltdown state entire world is in, Pakistan being no exception – even going by a conservative estimate, we would have at least some people who would be willing to sell at a discount.
Now other minor factors would also play their due role. E.g. in a places where there is some perceived uniqueness in terms of water availability, number of available properties, security, nearness to some attraction, etc – those prices would tend to be more ‘sticky’ and would barely go down.
However, there are other areas that are vast, properties there are numerous & barely distinguishable from one another, and settlement hasn’t yet reached a mature status – there values would start sliding faster during a down cycle. DHA City is an example; values are possibly 40-50% down from peak and journey continues.
Settled part of DHA is also vast, is trying to hold out to glory days of 2016, but the wall is crumbling around the edges – first open plots, then old houses, and finally new houses – usually in that sequence.
These are generally harsh economic times and already owners seem to have moved to lower mental price points. So for old houses:
* 500 square yards –> From Rs. 8-9 crores down to Rs.6 crores
* 1000 square yards –> From Rs. 16-17 crores down to Rs.12 crores
Unfortunately, even these lower price points are not such that buyers would rally with delight. Hence, it’s an evolving story; this much downward slide took 3-4 years. Keeping watching and the likely scenario (prices at which sellers mentally agree to make a deal) over next 3 years or so may be:
* 500 sq yards –> From Rs. 8-9 crores down to Rs.6 crores –> Further down to Rs.4 crores
* 1000 sq yards –> From Rs. 16-17 crores down to Rs.12 crores –> Further down to Rs.6-7 crores
Most investors know this too; no wonder there are even fewer buyers notwithstanding the frequency with which governments of the day roll out amnesties. And with the percentage of sellers growing in a troubled economy, prices are becoming less sticky in their downward journey. Some areas & people will continue to hold out – but not all areas & certainly not all people.
Things are never static & neither is property market. Life goes on.
Kamran
on said
@Muhammad azeem uddin. these are not Satta place now. Saadi garden is going to become living place. many house are constructed there. it has good location than Saadi Town. mostly ppl are selling their house in SAADI TOWN and buying in Saadi Garden.it has good commercial space as well as 400 sqyrds plots. i agree with your Surjani Point. but genuine ppl dont have options in 35 to 45 lacs in any area. PAKLAND has reputation of Strong Files. GULSHAN E OSMAN and SAADI GARDEN is now good choice for genuine buyers not for satta investors. both societies have good location opposite to SAIMA VILLAS. Near to JINNAH AVENUE. Mark my words. anyone will not regret buying in these areas. keeping in mind for GENUINE BUYERS
zahid ali
on said
Dear Kamran
Saadi Garden and Saadi Town have very less land for Amenities. I think (not sure) less than 5% area is reserved for Parks, gym & masjid. I think there is specific plot for school in both Saadi Town and Saadi Garden. All schools will be run on residential plots in future that will make more congestion in the narrow houses lane (i think 10 feet wide). The main road of Saadi Town is also not as wide as it should be (60 feet wide). They utilize 95% of land in plots in order to enhance the profit. Right Now Saadi Garden have green field, that is why looking beautiful, but once all plots are constructed, there will be no space for day to day activities. Imagine when two families would be living on each plot then there will be no space for amenities. Where all children will play, even masajid would not be enough to cater all namazis.
Kamran
on said
@Zahid Ali
u should visit Saadi Garden now. u r rite about amenities but dnt u knw there is no decrease in Rates of Saadi Town. In Saadi garden. there is mosque is every block. even in punjabi saudagran there is one mosque with no amenities for other. but plot price is about 10milions.
Zahid Ali
on said
Kamran Bhai
Nodoubt prices are high but very difficult to sell plot. I dont have any intention to discourage any owner but I always compare old KDA planned areas of Karachi. Big government school, big play ground, big mosques, big hospitals. These private developers are only interested in plots. Cowasjee was even not satisfied with DHA planning. He called DHA as plot planner not society planner. These developers are avoiding every amenities and since they cannot avoid mosque that is why planning small mosques at the loss of 6 to 8 plots.
Kamran
on said
@zahid ali. agreed but ppl are fedup of old locations due to utlities and security. but if they want to go back to their area they can easily buy because of rates in newly developed area. rent is not bad either in new areas. they can easily add small amount in rent to live in other place in rent.
Zahid Ali
on said
https://youtu.be/FFde_8ZBIo0
In this video, it is told that DHA city karachi and DHA Phae VIII rates is increasing
Jamshed
on said
Imran Khan and his associates ( land and builder mafias) have started Satta culture in real estate. Please be ware of this . This is a big trap. IK has no vision . He is a stupid man. . He has destroyed the economy and economy will further deteriorate . This type of package by IK will not lift the economy . Life of a poor and middle income will be more and more difficult and Land mafia And builders will make money. End user have to pay.
ANWAAR UL ISLAM
on said
Jamshed
The package was to boost the construction sector to create jobs for daily wagers.
But in reality cement sale has declined by 40%.
Pakistani economy is on verge of collapse.
Construction Package has resulted in parking the ill-gotten money in real estate sector that creates no jobs.
IK has created another real estate bubble.
I have met many investors who are afraid that soon real estate bubble will bust in Pakistan as there are no end users but only the investors.
Afnan
on said
Anwaar ul Islam shb
What about karachi , it seems nothing happened and things are on the same pace , prices are stagnant , seller is not accepting the current scenario and decline of property sector , how it will change and prices will go down
ANWAAR UL ISLAM
on said
Afnan
Things will get better by the year end.
Three factors will shape the real estate sector.
1- Global real estate crash
2- Pakistani economic crash
3- No real demand of real estate as market has no end users. (A) Local Pakistanis have low purchasing power (B) Remittances are low as Pakistanis are returning home from MID-EAST Countries.
Amir
on said
DHA Lahore has seen over 20% price jump in just 2 weeks. what exactly you are trying to achieve by telling us all this?things you say dont matter here. Govt has allowed people to invest in real estate with black money again and prices are skyrocketing. shame on Imran khan and all his promises with the common man.
Umer
on said
I regret the time when i first followed your post back in 2018 and since then you have been telling the same story. I have no clue what is your real agenda Anwer sb but too many people have already suffered huge losses by not buying a property in time. prices have doubled up since then and are beyond the reach of many now who listened to you. Nowhere in Pakistan prices of real estate dropped – not even on your own website. i know either you are going to say “so if i think its the right time then i should go buy the property right now” or you are going to simply remove my comment. Sorry Anwar sb but you have not been any help in last so many years. property prices continue to inch up everywhere and despite all the indicators you have mentioned, pakistan market works differently. still if you think i am wrong, help me buy a plot in PH 8 lahore in a reasonable price. Dont just confuse us all by posting articles to drive your agenda.
Muhammad ali
on said
Asslam u Alaikum Brothers,
Very sorry to say harsh words ..Mr anwar is novoice of real estate market of Pakistan and he pass comments as he is global property expert.
I have more than 15 years dubai real estate experience and defence Lahore experience. I have real estate offices in both Lahore and Dubai.
I have seen 2001 to 2005 boom then recession of Pakistan real estate …then seen 2011 to 2016 real estate boom … now again seeing boom in the market.
After corona this decade is of assets price appreciation for both real estate and gold. People trends change to real assets than investing in stock market.
Pakistan especially Dha Lahore market as I have experience here and speciality will boom in coming Years.
And with new blue economy initiative by govt there will be no stop of real estate prices boom in Pakistan.
Avoid private societies especially keep out of bahria town like societies trap.
Invest only in Dha owned projects which ever city you wanna invest.
My humble suggestion to brothers try to grab any asset in Dha Lahore according to your budget.
I personally bought plots in phase 7 Z2 block in last year. They are appreciated 30 lac each.
My assessment phase 7 one kanal plots will be min 2 crore in 1 year time. Nowadays you can grab deal at 1.15 crore to 1.2 approx .
Try to grab any possession plot in Dha Lahore any phase doesn’t matter.
Follow your budget.
Humble opinion for real estate purchase take opinion of experience people and people who are in the market . Avoid Biana plots.
Try to deal face to face with seller give agent his full 1 percent commission but try to deal face to face.
And for mr.anwar in public posts try to give people positive approach and avoid your life frustrations in your blogs.
I really hope you also make some money in real estate and be positive in life and assessments.
In last 150 years of available data real estate assets appreciated all our the world with time.
In our subcontinent with too much influx of population you can never go wrong.
Only suggestion to invest in Dha assets if you are not professional real estate expert.
Raw land is also good to invest but it’s not for everybody. There are too much loop holes and fraud. It’s only for experience people who have experience of investing in it.
I also personally not invest even with so much experience.
Allah Bless you all .
Ameen
Remember in your prayers
Ali
Jaffer Husain
on said
The Pigeon with closed eyes. It is said that when a pigeon sees a cat, it closes its eyes. That way, It assumes that since the pigeon can’t see the cat, the cat does not exist and that is its folly. I sometimes feel like the Pigeon who has closed its eyes to escape accepting the inevitable.
Before investing your money in Pakistani or international real estate, please Don’t listen to anyone, use your common sense, otherwise you will be end up like the pigeon.
Jamshed
on said
I respect the views of Anwaar Ul Islam because his opinion is based on fundamentals. Pak real estate stands on wall of sand. This can collapse at any time. Imran Khan has no vision . IK is handling the economy in an inappropriate way , resulting in the creation of two communities. One will be very poor running after the food trucks and second ashrafia like himself . He will completely wipe out the middle and average income .
Still I believe and think the real estate in Pakistan would collapse . All prices in DHA are fake and unrealistic and do not match with the ground, real economic indicators. Thanks very much.
ANWAAR UL ISLAM
on said
Jamshed
I have a question. Who buys property in Pakistan. Investors. But where are the end users.
End users are Local Pakistanis who have lost their Jobs. Plus PAK EXPATS who have lost jobs in MID-EAST.
How long investors will keep Parking their wealth in real estate?
When end users are hard to find prices will collapse.
Jamshed
on said
Anwaar
U are absolutely right. Your analysis is based on facts . How long the others would deny.?
Today I was reading the newspaper and my head is down with shame. South Korean ambassador has donated 8 lac dollars ( 12 – 13 crores Pak rupees) to assist to control covid infection. Now 12 crores is just the demand for 500 yards house in DHA. At national level , this is the amount we are accepting happily. U can imagine our standards.
ANWAAR UL ISLAM
on said
Jamshed
Pakistan GDP will be $310 billion in 2022.
Whereas GDP in 2018 was $314 Billion.
So Lost 5 Years.
In 5 Years Population will increase by 25 Million.
So Purchasing power of people will decline.
Only Made in Pakistan Revolution can save Pakistan.
Remittances will be less in 2020 worth 5 billion dollar
Worth equal to 1 LAKH Home Construction.
This is why that cement price is already 40% down.
I LAKH Homes means Millions of job loss.
Things are very ugly.
I wish that Pakistan might avoid the trap where US and Europe have fallen. It is Japanese Style of GDP Growth.
Japan GDP in 1995 was $5 Trillions
Japan GDP in 2000 is $4.7 Trillions
Lost 25 Years.
If You see European Countries from 2008 to present on can see that EU has failed to progress since 2008.
Lost 12 Years.
Pakistan Lost 5 years of any GDP Growth.
Jamshed
on said
Anwaar
U are absolutely right. In my opinion, all the real estate agents should be authorised to do this business if they achieve the basic qualifications about economics and business administration. There should be some regulations about real estate business like licensing to those who have basic qualification about economics and business . This would allow them to understand the link between real estate prices and national and international economic parameters. This would also help them to understand u what u mean to say. This would also help them to predict and better evaluate the property prices.
ANWAAR UL ISLAM
on said
Jamshed
Most people who lose money are due to greed.
Quick money making trend in Pakistan.
Without end users this boom will be short lived and soon investors will lose millions.
Muhammad azeem uddin
on said
Dear anwar sb,
RERA( Real estate regularity authority).it is the clauses FATF FATF are pressurised to implement it in Pakistan. Yesterday I read in newspapers Pakistani government has seriously want to implement it.
Kindly put on light on this subject and also explain out come price effect.
ANWAAR UL ISLAM
on said
Muhammad Azeem Uddin
Government will soon impose RERA Acts to monitor real estate transactions for transparency. Same will be done for jewelry transactions.
To avoid black list from FATF Pakistan has to control the money laundering and black money.
The act will destroy the short lived property boom and people will lose millions.
zahid ali
on said
Couple of months ago, one of the minister said that relief in not furnishing source of income can not continue after 31st Dec 2020. What i understand is that after 31st December 2020, investors will have to furnish the source of income due to FATF for transaction in real estate. Land Mafia have time to execute new speculative cycle up to 31st December 2020.
zahid ali
on said
Speculation is always executed by investors. In Pakistan, Mortgage is not easily available. So, there is no role of end user in price hiking. Investors are really powerful and can execute new speculative cycle but at the end of the day, from where they will find end user without mortgage. In USA even with mortgage available as low as 2.5%, plenty of foreclosure is expected in 2021-2022. Richard Wolff a Marxist economist was saying that there might be a condition in USA where hundreds of home would be empty due to foreclosure and hundreds of family would be living on roads. 70% of population in Pakistan even can not imagine to buy a house at the prevailing demand. Now with a new speculative cycle, this percentage may increase. Drastic changes in real estate lawsm (like one plot or one home for one person) is the need of the hour in order to make this market affordable to common people. Otherwise it would be game of top riches 10% population.
ANWAAR UL ISLAM
on said
Zahid Ali
Home Ownership is decreasing in Pakistan.
More people are becoming renters.
In Lahore, Karachi and Islamabad 5 Marla 125 SQ Yards House is worth 125 LAKH.
Person earning 1 LAKH Per Month needs 10 years of income to buy home.
World affordability ratio is 1:5 but in Pakistan it is more than 1:10.
Still how many people earn 1 LAKH Per Month?
Zahid Ali
on said
https://asiatimes.com/2020/07/global-housing-market-chaos-nowhere-near-end/
ANWAAR UL ISLAM
on said
Zahid Ali
This is just the start.
abc
on said
You were predicting a downfall in real estate prices, but prices of real estate have started to increase.
Jaffer
on said
Increase where?
Shoaib
on said
Zahid ali
This article has nothing to do with pakistans property market . This platform is to discuss abt pakistan. Prices are gradually increasing in karachi and lahore. I dont know why but karachi has unexpectedly increased tremendously. Even i always agreed with anwaar bhai views . They are always logical. But ive seen some abnormal increase of around 20 percent in price even after 5 months of covid thing. Anwaar bhai pls give ur view waiting another year will be better or this is the buying time.
ANWAAR UL ISLAM
on said
Shoaib
Issue is that this amnesty scheme will end before or by 31 December 2020.
So speculation will be high.
Short term investment like 3 months is good but long term trends are negative.
Soon FATF will pressure to control black money to avoid black listing.
Secondly global real estate trends are negative.
Afnan
on said
Anwar shb, 10-15% property price increase in karachi after amnesty scheme, this is absolutely inverse
Ayesha Shahi
on said
Mr. Anwaar ul islam is 100% correct in his assessment as market has no buyers.
Pakistan real estate market is not performing well.
https://www.dawn.com/news/1568592
IM
on said
itna sunnata kiyon hain bahiyon, please share your view and experience on latest market trends.. i like reading this blog