Pakistani real estate market was considered the best-performing asset due to lucrative profits, instant gains, and long-term benefits. However, things are changed today. Real estate prices are crashed in Pakistan since 2016. In the year 2016-2017, the new real estate laws raised taxes on property dealings. So as a result, the prices were revised and the flow of black money was blocked by the government professionals in the real estate industry.
Although people are still investing in real estate, unfortunately, you cannot leverage as many benefits as you earned in previous years.
Have a look at a few key reasons why the real estate market is down in Pakistan.
1. Zero Tolerance for Black Money
There are plenty of factors that have caused a decline in the prices of real estate. First and foremost is the initiation of ruthless accounting. This is probably the major reason behind the downfall of this industry. Now, the government has zero tolerance for black money. And there was a time when 70% of the economy was black money.
So, the people who bought their properties through black money are now answerable for their actual source of income through which they earned the property. Buyers who have purchased a property through black money are now quite scared and reluctant to invest in the industry. That’s the reason, investment in the real estate sector is not considered an ideal decision today. And that’s definitely one of the main reasons why prices are down and people are not buying property today.
2. New Property Tax Laws
After 2017, the budget that was introduced in 2019-20 in Pakistan was deemed as the game changer in the real estate industry. Instead of bringing more profits in the future, the budget has had different tax amendments.
First, people were made different filers for buying properties. And secondly, the seller was required to hold constructed property for at least four years as well as the unconstructed plot for approximately eight years for avoiding any higher Capital Gain Tax. Thirdly, property valuation rates were also increased by FBR and scheduled to 85% of the market value. Due to this reason, the overall volume of transactions has also decreased. All the real estate investors avoided showing any interest in investment in Pakistan due to different property tax amendments. With such low investment, property prices are decreased and people are no more motivated to invest in this sector. This is probably the third major reason for real estate prices fall off in Pakistan.
3. High-Interest Rate
Property taxes are undoubtedly the most important component in the real estate industry. If you are in the real estate sector, you must know that interest rate is inversely proportional to property price and sometimes it has direct impacts on property prices. The increase in interest rate will eventually decrease property prices and vice versa. The reason is, when interest rate increases, banks usually give more profits on fixed deposits.
That’s the reason, people sell properties and then deposit huge amounts in banks so they can earn maximum profits. However, when the interest rate decreases, everybody prefers to buy properties which ultimately increases the demand and then prices get automatically high. Therefore, the high-interest rate on the property is also another big reason for the downfall of this industry in Pakistan.
4. People Prefer Other Investment Opportunities
We have seen many people who prefer to keep their money in the bank and never invest in the real estate industry. They choose to put all their money in different investments which include stocks, bonds, mutual funds, and several others. Consumers prefer to buy big apartments and homes at relatively lower prices than the actual amount which was sold previously. Consumers sell their properties and houses so they can raise more money to invest in different areas.
5. High Inflation Rates and Increased Cost of Living
Inflation is one of the crucial factors to notice which is greatly contributing to the loss in the real estate industry. Due to the high inflation rate in Pakistan, people feel helpless and cannot even fulfill their basic necessities. Unfortunately, the inflation rate is expected to get higher in the future. And people with average income and limited sources definitely cannot buy property as they also have to address other life needs. To meet the high costs of living, people want to save maximum money. This means people are more concerned to fulfil basic life needs than investing in property.
Another big factor that is causing more decline in the real estate sector today is the less demand for properties. People are no more interested to buy properties and selling them at lower prices. And the reason is – the high cost of living.
People who are still buying property and investing in skyrise buildings are probably industrialists, investors, or sponsors. A common person with limited come source is no longer able to invest in property as he is more willing to fulfill the educational needs of their children.
Real Estate Investment Opportunities in Pakistan in 2023
According to Pakistan’s real estate forecast for 2023, this year is going to be a big year for the real estate industry. Here are a few reasons why:
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Unstable Gold Prices
As we all know that gold prices are getting unstable. Every single day you wake up and hear that gold prices have gone high at a certain percentage. Due to this instability in the gold market, people are no longer investing in gold and might take interest in buying a new property.
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Stock Markets
Many people don’t have enough knowledge and ideas about shares. They don’t know how to trade, or what exactly is the whole stock market. If you are also the same person, do not invest in the stock market ever. Because you need to quickly decide whether you should buy or sell your shares. And if you don’t do this, then there are chances that you will lose all your money.
Many investors do not want to take such huge risks and they don’t prefer to invest in stock markets. That’s why people have sold all their shares so they can invest in the real estate market in Pakistan. With time, people will get aware of the stock market and won’t invest in it as they will consider real estate a more brilliant way of investment.
Conclusion:
If you are willing to invest in real estate, you must know all the good reasons that make it a healthy investment opportunity for you. if you have any doubts, then it’s not recommended to consider them.
In case you are willing to invest in a skyrise building, apartment, or any other asset, it’s recommended to get professional assistance and suggestions from Buildings.pk experts who can help you think more clearly and you can decide wisely.
