Insanity is doing the same thing over and over again but expecting the different results. Once again the government has offered another amnesty scheme for the real estate and construction sectors. The aim of the current amnesty scheme is to offer; firstly another chance for the people with ill-gotten wealth to be filer and secondly to provide the jobs for the daily wagers. But history shows that all amnesty schemes have failed in Pakistan. This scheme has already failed as Pakistan realty market has no end user.
Who are the End Buyers or End Users?
In a typical real estate market properties exchange many hands. This is due to the selling of properties for profits. Some people sell properties within months of the purchase whereas others in years. But eventually plots or houses are bought by the people who are not investors but buy for living purpose. These people are known as the end users. The end users have huge impact on the real estate prices. High demand from end users increases the property price and vice versa.
Who are the End Users of Pakistan?
Pakistan is among the countries that depends on the foreign remittances. Nearly 10 million Pakistanis live in America, Middle East and Europe. Yearly remittances sent by Pakistani expatriates are more than $20 billion. Most of the money ends in the real estate sector. So first end users in Pakistan are the expatriates. The second group of end users is of local Pakistanis including the businessmen and professionals. These two groups are responsible for the most real estate transactions in Pakistan.
Pakistan realty market has no end user due to the declining purchasing power:
Unemployment is widespread in Pakistan. Experts have predicted that Pakistani unemployment due to COVID-19 will be 30%, highest in the recorded history of Pakistan. Pakistani economy has also contracted first time. Local Pakistanis have seen massive purchasing power decline. The Pakistani expatriates are also not well off. Hundreds of thousands of Pakistanis have lost their jobs in UAE, Saudi Arabia, Europe, UK, USA, Canada and Australia. Foreign remittances are already low. This means less people will be investing to build homes or buy plots. This will result in mass unemployment for the daily wagers and also real estate prices will crash. Cement sale is already 37% down, a very disappointing indicator.
Global real estate market has already crashed. In US and Europe people are leaving cities and real estate transactions are record low. Due to unemployment, people are unable to pay the mortgages that will further crash the property prices across the globe. High end luxury properties are the real victims due to the declining purchasing power.
The situation in Pakistan is not better. Investing in Pakistan real estate property is very tricky as speculation is very high. Small properties are exchanging hands but no buyers for the luxury properties. This amnesty scheme will temporarily increase the real estate prices across Pakistan but in the long turn prices will crash as there are no end users. Therefore buyers should be very careful.