Pakistan Real Estate Investment: Risks and Returns

Considering the continuous economic shocks, increasing security threats and persisting political instability, which impacts the constructions, development and foreign investment, we witness that the commercial sector of Pakistan real estate market is remain complex till today. However, despite having these risks, there have been remarkable improvements in the real estate sector in 2013, and we expect real estate sector's further development over the next five years.

This article basically talks about the risks and rewards in Pakistan’s real estate sector, and these risks and returns can be calculated by considering the following factors:

1)      SECURITY FACTOR

The instable security situation in Pakistan has always casted dark shadows over the real estate sector and will continue to impact the commercial realty sector. The ever rising urban violence, communal riots, sectarianism and a considerable insurgency in western Pakistan will significantly complicate the real estate industry’s position.

2)      ECONOMIC FACTOR

The overall health of an economy is another crucial factor that affects the value of real estate. The state of economy is measured by economic indicators such as the GDP, employment opportunities, levels of manufacturing activity, the prices of goods in the market etc. The economy of Pakistan is quite lethargic at the moment; the same can be expected for real estate sector if the situation persists of a long time. The energy crisis has led to jamming of the many important industries of Pakistan, resulting into less input, higher demands and unaffordable prices. Many industries have even shut down and fled to other countries rendering many people unemployed, further adding to the hefty burden on economy. Speculating these conditions, and declining currency reserves and increasing materials costs it is hard to ensure that people will be willing to invest in realty in the near future.

3)      INTEREST RATE

Pakistan is currently undergoing the highest levels of inflation and economic crisis. The interest rates are continuously rising. The increase in price of basic commodities has badly affected the purchasing power of buyers; the prices of realty have skyrocketed and local people tend to save more than spend. Despite making positive developments in 2013 and realty sector being in growing stage, most of the people are reluctant in investing in real estate properties which has jammed the realty sector to quite an extent. Although State Bank of Pakistan had decreased the interest rate from 14% to 13% in 2011, yet the new government has reversed the process. The interest rates are rising continually further decreasing the buyers’ ability to invest in residential property.

4)      POLITICAL FACTOR

The successful transformation of governments from one democratic body to another and peaceful transfer of powers shrugs positive impact on the realty sector in the next five years. The new democratic government in Pakistan is expected to bring venues for the development of Pakistan’s once spectacular real estate sector and bring it back to the life and status it once enjoyed. The government of Pakistan is also taking effective measures to contain violence and terrorism across the country.

Despite having more problems than favorable factors, it can be safely claimed that real estate market in Pakistan has not achieved its true potential as yet. We know that Real estate markets are greatly affected by overall economies. When the economy is booming the real estate demand goes up, which attracts more investment into the market. At the current time Pakistan has plenty of untapped promising potential and the real estate market will escalate as soon as positive developments are seen in the overall economy. But this can only be promised through endless efforts of both, the government and the private sector of Pakistan.

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About Author

Aujala Marrium is a freelance blogger and she has been writing informative articles and reviews for a few years online and she especially likes to write on marketing, investments and real estate. Follow her on Google +.