In the wake of the recent policies of the Government and real estate situation we need to understand that the real estate dynamic have changed since 2016.
All those who have adapted are now reaping the fruits and those who have not are still wondering what to do. A lot are wondering where to invest. A lot of people are also coming with their own chaos theories how real estate in Pakistan will be destroyed and how big profits will come to an end.
Notably, it is not a market where you can invest anywhere and expect your money to be quadrupled in a few years.
If you know where to invest in real estate, you will always make money, no matter what the noise tells you. As long as humans exist there will always be property. In short, real estate investment dynamics in Pakistan have changed and those who will follow will flourish and always remember this Warren Buffet quote.
In terms of Pakistani real estate market you need to take into account the following factors and you will never fail.
1. Major market factors
These factors are common and are always relevant in any market, however in the present market scenario they obviously get a lot more importance than before.
- Developing projects
- Value addition
- Rental prospects
- End user demand
In short you need to invest in areas where new projects are being developed in areas where rental prospects exist due to end user demand and value addition is being done on existing land or property by developing or constructing commercials offices or apartments.
Besides this we should also understand that real estate is always local so what’s plausible in Karachi may not be applicable in Lahore. Plots in DHA Peshawar gained 90% in one year while DHA Lahore 9 prism market stayed completely silent. Also keep in mind what may be right for someone else may not be right for you. If you are someone with lots of money, it may be wise to buy a commercial plot at some good location, build commercial on it and rent it out for few years and then sell it out.
2. Effect of Government policies
Another important factor which is going to determine the direction of future real estate investments in Lahore are the Government policies such as CGT on built up residential property which is limited to 4 years only in comparison to 8 years for plots it is 8 years. This means that if you invest in constructed residential properties you will be free from any CGT in 4 years.
However, the Government wants activity rather than millions of rupees laying waste in plots; even our PM Imran Khan was seen quoting on TV saying that we need to shift our focus on high rise and housing projects rather than developing plots. This means that there will be a constant shift in Government policies that will favor constructed properties and projects.
3. PKR Depreciation
USD and PKR exchange rate has always been a concerning factor for those who invest from abroad. Buying in installments rather than paying lump sum can partially hedge PKR depreciation.
Still wondering where to invest?
The answer is construction projects in installments, they add value, they are usually made in developed areas where rental and end user prospects exist, the Government wants to promote them and above all if you are afraid of PKR depreciation they can help you hedge.