SOCIO ECONOMIC REVIEW
Pakistan’s economy showed significant signs of recovery and expansion in 2018 in comparison with previous years. The factors contributing to this improvement include improved security conditions, strong credit growth, soaring investment activity, recovery of the agriculture and manufacturing sectors and an overall improvement in macroeconomic conditions.
However these factors were affected by a rise in oil prices and other commodities, decline in foreign exchange reserves to fill a financing gap. GDP growth in FY17 was recorded at 5.3% as compared to 4.7% in FY16. GDP in 2017 was $304.3 Billion as compared to $283.66 Billion in 2016. A GDP growth of 5.5% is being forecasted by the IMF/ADB for 2018 with a projected GDP of circa Rs 321 Billion.
Inflation has increased in FY17 to 4.2% compared to 2.9% in FY 2016. The increase is mainly linked to a rise in oil prices globally. Inflation for both food and other items rose slightly despite improved supply adequate food supplies as global prices strengthened.
The benchmark interest Rate in Pakistan averaged 11.29 percent from 1992 until 2018, reaching an all-time high of 19.50 percent in October of 1996 and a record low of 5.75 percent in May 2016.
Current situation of Pakistan’s real estate market and its long-term economic forecast
The real estate sector in Pakistan is growing and is an important sector of the economy. Pakistan spends about $5.2 billion on construction annually, and construction output accounts for 2pc of GDP. The accelerating rate of urbanization in the country requires urban planning and hence an effective management of the real estate market.
What to Expect from the Pakistan Real estate Market in 2019.
The Pakistan real estate market is one of those business sectors in Pakistan which has suffered a lot during the past few decades due to several factors. There have come a lot of ups and downs in that sector, that is why almost all the people who are somehow associated with real estate or property business, want to know what may be next. This article has been written keeping in mind all those factors which may affect the Pakistan real estate market in the coming days. But before we discuss the Pakistan real estate market and the expected forecast of 2019, let us first revive a brief summary and overall business round up of the past years.
Summary round up of the Past Years
When we talk about the Pakistan real estate market, we are merely talking about how the Real estate sector in Pakistan has performed since the year 2001. The reason behind it is that this industry had a real up rise since that era. It was the time when Pakistan real estate market was booming until the first half of 2017 with great success. No doubt there came many ups and downs but the overall report was not so much disappointing. All the mega projects and major societies stood up in that span of time, and also the sale and purchase on small and large scale was also very much astonishing. The gap which came from time to time was very much dependent upon and because of the foreign investment. Taxes and other restrictions during the past had direct impact upon as it is a critical factor for potential foreign investment in the sector.
As compared to the past, present condition of Pakistan real estate market can be declared as very much favorable for the seasoned investors. These kinds of investors very well know where, when and how to invest in the market without losing the game. No doubt the property bubble of 2015 and 2016 raised the prices of land and furnished property in certain areas much higher than their actual assessment. It had an overall impact on the whole sector and like any other asset the prices needed to correct and reach their genuine assessment in order to gain the confidence of genuine buyers. It must be noted that genuine price correction is a directly related to the health of overall real estate market.
Due to the above factors and reasons Pakistan Real Estate Market Analysis 2018 will just act like a forecast for the Pakistan real estate market 2019. In that regard the main factors can be summed up as follows:
Opportunities Offered in 2018
According to the economists and the real estate analyzers, in 2018 a very much stable real estate market. It in turn started offering various opportunities all over Pakistan. However, it will be good if you do not expect any major bubbles in the Pakistan real estate market. However, the societies which are potential trend changers and best to invest in the upcoming year.
Behavior of buyers & sellers
When talking about the Pakistan real estate market, we can merely say that it is the market of the buyer rather than the seller. It is a fact that the properties are always more than the actual number of the potential buyers. The reason behind it is that the actual buyers are just waiting for the prices to come down and to be bottomed out. It will result in their will and choice so that they can buy much cheaper properties at the end of the game. As compared to the buyers, the sellers are much more desperate to some regard as they face very much difficulty and issues in finding potential buyers. Unless there is no buyer the sellers and investors have to minimize the losses through some other gateway. In other words they would have to compromise on the quality which will automatically lead to a disturbance in the market.
Impact of CPEC on Pakistan Real Estate and Gwadar
China Pak Economic Corridor, also widely known as CPEC is a link between two countries China & Pakistan forming an alliance for the future of business dominance. The need for CPEC comes at a time when China has already captured the world’s production market but due to its geographical location faces hardships when sending out shipments. When you put your land to use, it has a dominant impact on the entire region. The projects impact on Pakistan’s economy will be huge and so will be on the real estate sector. The 3,218 KM long highway is under construction and still requires a lot of time and patience to complete.
CPEC is a one-belt one-route plan that comprises a series of interstates, railroads, pipelines, and electricity. Linking Pakistan’s Gwadar deep-sea port with China’s Kashgar in western Xinjiang will allow neighboring regions to make use as well and reduce their trade routes with the rest of the world. Approximately 83% of China’s oil is transported thru the Strait of Malacca to Shanghai. The area it needs to travel is approx. 16ooo KM which requires 3 months owing to traffic and weather conditions. With Gwadar operational, 5000KM will be reduced cutting downtime and cost at the same time. The estimated cost of the project is around US $ 62 Billion. About US $ 46 Billion will guarantee the project gets operational by 2020 while the rest will be spent on upgrades and to manage overhead costs.
Economic Boost in Pakistan
The effect of CPEC on Pakistan’s economy will be huge. It would be a reason for setting up a lot of industry thus creating many jobs. As per the findings of Harvard International Development Research Department, the next 10 years annual development rate in Pakistan would rise to 5.07%. It will be the second most elevated in Asia.
With an economic boost in the country, the demand for accommodation would certainly rise and a huge demand for land would be needed to fulfill. With more individuals being able to buy property, the real estate sector would thrive. The true impact would be witnessed after 2020 when the road belt is complete and becomes functional.
Chinese Immigration in Pakistan
The fact that CPEC is a joint venture between China & Pakistan means that many Chinese & Pakistani engineers would be deployed in Gwadar and along the lengthy belt. This is good news for the real estate sector as accommodating them would require the establishment of small cities along the belt. The land thus would be required in plentiful to build safe housing societies with all the amenities. Gwadar being the ultimate port would develop into a major city just like Karachi. Gawadar Lahore & Karachi would be the epicenter of after the completion. Property in these major cities will witness an enormous boom as there would be a need to accommodate not only the citizens but foreigners as well.
Pakistan’s Real Estate Sector at Its Bloom
Nevertheless, the real estate sector of Pakistan has proved itself to be the strongest of all sectors and has made an appreciative comeback after the year lasting lump.
China has already made huge investments in Gwadar, attracting the foreign-based Pakistani’s back to their homeland. The major target of all these seminars and Expos are the Pakistani’s settled abroad, as they are always on the lookout for making good and profitable investments in their own country.
With the current developments being made in Karachi, under Bahria Town Karachi will also come out to be the hub for foreign investments in the years to come as it offers numerous major attractions, from the world’s third largest mosque to the Rafi Cricket stadium. We have already seen the revolution in Karachi’s real estate market due to projects like Bahria Sports City, Bahria Paradise, and Bahria Golf City.
The world is witnessing recessions and an awful decline in real estate sector, whereas Pakistan stands firm, proving itself to be the best investment market in the world.