REAL ESTATE WITNESSING A CHANGE IN TREND
Realities started dawning by early 2005 and a sudden and drastic decline in real estate prices came with a serious blow to speculators.
FROM SHAMIM AHMED RIZVI, ISLAMABAD
Feb 20 - 26, 2006
During the last year, the real estate business which reached a new high after the events of 9/11 throughout Pakistan has witnessed a significant change which is being described as positive and healthy by experts in this business. It was not the rush for the purchase of plots, which led to all time high escalation in their prices, mostly speculative in nature. The emphasis has now shifted to construction of houses and flats for sale on installment or renting them out. This change is highly welcome as house construction industry will create hundred of thousands of new jobs, besides helping to meet the acute and growing shortage of residential units in the urban areas of the country.
Worried about their savings kept in US & European banks after 9/11, Pakistani expatriates living in these countries remitted, mostly through private and un-official channels about $ 7 billion to the country. Much of this money went into real esate business. Prices rose enormously when most of the property dealers teamed up with their investors and speculated freely on plot files. As a result of this unfettered speculation, real estate ceased to be a business and turned into a commodity. Plots were bought and sold at random with each investor turned buyer selling them to another investor turned buyer to earn a quick profit. Prices thus soared artificially; they were unnatural and unrealistic. The wishes of the end user, i.e. the man who was keen to buy a plot of land and not to sell it but to build a house, went up in smoke.
Like other parts of the country the real estate business in Islamabad also reached a new high during 2002-04. Realities started dawning by early 2005 and a sudden and drastic decline in real estate prices came with a serious blow to speculators. Instead of selling their plots at losses or blocking their huge investments for years, the investors are now gradually shifting to construction of houses and flats. Encouraging government policies, availability of easy and cheap loans from commercial banks and growing rents of constructed houses and flats because of their acute shortage in urban areas specially in Islamabad, Lahore & Karachi have lured investors to construction side.
According to a recent Population and Housing Census of Pakistan there were over 19.3 million housing units in the country. Of the total 19.3 million housing units about 67.7 percent were in rural areas and 32.3 percent in urban areas. The percentages of owned housing units was higher in the rural areas compared to the urban areas. However, the percentage of rented houses was significantly higher 23.2 percent in urban as compared to only 2.3 percent in the rural areas.
Addressing the inaugural session of the National Housing Conference 2005 in Islamabad recently, Federal Minister for Housing and Works Syed Safwanullah remarked: "housing shortage has reached its peak and it would be no wonder if the people stated braking into other's houses to find a roof on their heads. He expressed surprise and pain about the neglect of the third basic need of human beings - housing, food and clothing preceding it. He admitted that there was mass movement of people from the rural to urban areas, and Karachi bearing the brunt of it. But, with careful planning and implementation it could be solved to a large extent. He asked the building circles to come forward with proposals to entirely eliminate this problem. He said that the government was trying to get out of the building business and was encouraging the private sector to fill this vacuum.
In this process the Capital Development Authority (CDA) has gained tremendously as it has been asked by the government to develop four new sectors in addition to expediting development work on the three existing sectors, in order to provide plots to the low income group and middle class at affordable prices. It has almost doubled the prices since last year but it is still cheaper than the prevailing market prices. As a result the CDA received over 15 lac applications for the allotment of about 5000 plots of different sizes in the already acquired land of I-15 sector at low compensation to the real owners years back.
The government has rightly focusing its attention on housing and construction industry, as it is the most vital sector of Pakistan economy. The federal government, with close coordination of provincial governments, is giving final touches to a new policy to encourage construction sector rather than investment in plots. The government has taken serious view of the mushroom growth of fake housing societies in the country, which are fleecing the innocent people. Actions have been initiated against them. Under the new policy, shopping malls, plazas, flats and housing units will be constructed by diverting capital from plots business to construction sector. The government will take advantage of present heavy investment in real estate business by shifting it to productive side.
The new policy will enable the government to achieve its goal to promoting economic activities as information technology, telecom and construction sectors can generate extensive employment opportunities to reduce level of poverty. At present, billions of rupees have been invested in the estate business; particularly in plot business, which is unproductive, and people have been trapped in fake housing societies. The 42 allied industries of housing sector can only be pushed forward if investment is attracted to construction sector.
Prime Minister Shaukat Aziz who has a full picture of the present situation has already directed the Chairman Capital Development Authority, Kamran Lashari, to come up with plans to open new sectors, construct shopping malls, and housing units to narrow gap of supply and demand of housing units in the federal capital. It will also help maintain estate prices at reasonable level. The Housing Ministry has advised Islamabad Capital Authority to make arrangement of 100 acres of land in Islamabad to construct housing units for government servants. A letter on the same lines has been written to provincial governments to allocate land in each district for this purpose. Similarly, provincial governments are also engaged in preparing policies to divert huge investment from plot business to construction side which are expected to be in place in a short span of time.
Chairman, CDA, Kamran Lashari, did not agree with the common perception in the relevant circles that October 8 earthquake has caused any slum in the construction industry in Islamabad. There was a temporary slow down in the first weeks but by now it has picked up to its normal level, he added. He disclosed that Master Plan of Islamabad in which CDA would propose rapid developments of new sectors to resolve housing problems of the Capital City for at least next 25 years. The revised Master Plan would shortly be submitted to the government for approval.