One of the fastest growing industries in Pakistan is no doubt Real Estate. It has always been a preferred investment avenue for local as well as overseas Pakistanis. The demand for real estate projects has significantly increased with Pakistan’s rising population and economic growth. According to the report by PACRA, population of urban areas of Pakistan is the highest in South Asia. Being the fifth populous country in the world, Pakistan requires various housing and commercial projects to satisfy this growing stable real estate demand. With the evident rise in various large scale housing schemes and commercial projects in recent years, real estate market in Pakistan has contributed more than 3% to the GDP and is an industry worth $1.5 trillion.
Pakistan’s real estate industry has always been a heavy contributor to the economic growth of Pakistan. According to the report by World Bank, assets of this sector contribute approximately 70% of the country’s wealth which is close to an estimate of USD 400 billion. Also, this sector is considered amongst the largest provides direct employment to many individuals and also increase the demand for many industries of the economy which include cement, paint, architects, urban planners and other building materials. Moreover, due to this positive growth of this sector, many real estate consultancy offices are opening up to provide the best advice on investment decisions.
While the real estate’s impact on the country’s economy is quite obvious, one cannot deny the impact an economy of a country has on this sector. Recessions for instance can have dire consequences on the trading of properties or over all on the housing market. Recession which is a significant decline in economic activity tend to have an impact on income, employment and also on industrial production of raw materials required for construction. When the economy is doing poorly, many individuals would have less buying power to invest or to buy homes. The prices of real estate usually go down the recession, so people with a solid income stream should think about buying as it is still a risky venture. On the other hand, during recession people tend to not sell their real estate as home values are depressed.
Inflation is also one of the most important economic factors that can impact the real estate industry. As cost of materials such as that of steel goes high, the overall construction cost increases which further pushes up the value of the property. With prices touching the sky, demand for buying homes or investing in plots may lessen among potential customers or investors.
Other economic factors that impact real estate development in Pakistan include FDI (Foreign Direct Investment) and GDP (Gross Domestic Product). Pakistani government’s lenient regulations regarding FDI can boost international projects which not only include residential or commercial shops but also hotels, educational and retail. This is turn will create more investment opportunities for locals and overseas Pakistanis. Moreover, Pakistan also received $21.8 billion in remittances in 2019. According to a World Bank report, an increase in foreign investments and remittances directly relates to the worth of real estate in a country. A strong GDP on the other hand can accelerate urbanization and employment and can increase purchasing power of individuals.
Moreover, unemployment and income levels play a huge role in determining the purchasing power of the investors. Typically, the higher the income an individual has, the higher the buying power he has. Purchasing a plot on a lump sum amount or even paying in instalments is still a high investment and requires a stable income level and employment.
Real Estate in Pakistan holds a huge potential with various housing societies built in almost every city with the best of amenities and attractions. There has been an increase in demand for premium housing projects and secure living areas. Many developers are building their projects by understanding the demographics and their investment potential. The housing is not only reserved for a burgeoning population but also for those who always only dreamt of living in a house of such standard. With many discounted deals and affordable payment plans, it gets easier for locals to buy these properties. Also, vertical building projects have further made owning a home accessible to them. Lastly due to such economic uncertainty people consider their individual and business wealth being used to purchase a property since the value significantly increases overtime.