Real estate market stagnant
The real estate players point out that the low and midsized property buyers are not left with consumable surpluses to go for house construction as due high inflation and doubled rates of construction material they cannot dream of planning a house of their own.
“Consumption of cement is the main barometer of construction activities in a country” said Khalid Rehman, a builder and real estate player. He said domestic cement consumption has remained stagnant at around 22 million in Pakistan since 2007. The real estate industry, he added, has also remained stagnant as far as construction activities are concerned.
“You do not see brisk construction activities in low-end or middle-class neighborhoods” he said, adding that the majority of the activities are in top housing schemes like those being offered by leading builders like Bahria Town or Lake City. “Luxurious enclaves being built around golf courses is a new phenomena in Pakistan,” said Wasay Athar Shiekh, another real estate player. He said these luxury villas are extremely expensive but there is no dearth of buyers.
Lake City Holding Chairman Ejaz Gohar said, “As builders and real estate developers, our aim is to get our schemes populated as soon as possible”. He said in recent years there has been more demand for luxury villas and larger plots then small houses and smaller plots. He said the houses around golf courses are more expensive because of the cost spent on the development of the golf course and large area of land related to it. He said his company would have earned more by developing small 5-10 marla plots but there are few takers for these in the current economic depression.
He said the moneyed class now desires to have the same ambience and atmosphere that they observe during their visits to the developed countries. “They are willing to pay for the luxury” he added. A leading builder and former chairman of Pakistan Contractors Association, on condition of anonymity, said that 25 percent of the construction cost goes to the government exchequer in form of different taxes.
Moreover, he added, “the real estate is the main source of our foreign exchange earnings”. He said property rates in established high end residential properties have surged by 25 per cent in last one year while the appreciation in low end areas is restricted to 5-10 percent. He said the government should encourage construction on plots. He said there is no construction activity in several government schemes launched even twelve years back.
He said the most prudent way to encourage development is to sell transparently a portion of each government scheme to private developers with condition to build within a specified period failing which they have to vacate the land with some fine.
He said flawed revenue record is another hindrance in development of real estate. He said it is due to this flaw that the banks do not lend money for house construction. He said in areas where land titles are secure, banks are also more willing to provide financing. He said lack of infrastructure around many societies keeps the property rates down.