The prices of real estate
have declined by 15-25 per cent recently
By Syed M. Aslam
Nov 29 - Dec 05, 1999
The unstable economic and political situation has taken a heavy toll on
the real estate prices throughout the country, particularly the biggest metropolis
Karachi. The prices of real estate have declined by 15-25 per cent depending on the
location and quality of construction of a particular property or construction.
Talking to PAGE the secretary of Association of Builders and
Developers (ABAD), Syed Ali Kausar Zaidi, said that like all other sectors of the economy
the construction activities could not work in a vacuum. Underplaying the prevalent slump
in the real estate market across the country in general and Karachi in particular, he said
that it is common phenomenon primarily due to an uncertain economic and political
situation in the country.
Many observers attribute the prevalent slump in the real estate market
on the drive against the loan defaulters many of which include members in the construction
industry. The accusation seem to stem from the fact that construction activities are
usually heavily financed by the state-owned banks and financial activities such as the
House Building Finance Corporation.
Sources who ask PAGE not to mention their names said that an
already bad slump in the real estate market worsened with the change of the government
last year and the following crackdown against the defaulters. It has resulted in the
slowing down of construction activities, in many cases to grind to a halt, as only genuine
builders have choose to remain in the business. This has also resulted in the stoppage of
work on many projects where structural works have already been completed.
In addition, PAGE was told, the influx of investment in to new
construction projects has also came to almost a standstill as few are interested to take
risks. With the most of the construction activities coming to a near close a handful of
genuine and scrupulous builders keep on plying their trade.
Kausar denied that the loan recovery drive had anything to do with the
slump in the real estate saying that the Karachi Development Authority (KDA) is wrongfully
charging the builders for the development works which in the first place are its
responsibility. Instead, he attributed, it to two other major factors. Number one, the
upgradation of the 1979 construction by-laws and a drastic increase in the cost of
construction during last five years.
The Sindh Construction and Building Ordinance of 1979, he said, must be
amended to meet the changing socio-economic needs of today. For instance, the
implementation of the law which permits construction of 1 plus 4 residential
plazas restricts the growth of construction in Karachi which faces an acute shortage of
The standard 1 plus 4 criteria restricts the builders to
construct housing projects which are just four floor high in a city where shortage of land
leaves vertical growth an only choice of building expansion, he added. In addition, the
drastic increase in the price of land over last two decades has made it impossible for a
person of an average means to even think of buying a piece of land, not to mention to
afford the high cost of construction.
Secondly, the cost of construction has almost doubled during last five
years primarily due to increase in the prices of cement from Rs 90-100 a bag to upto Rs
220 at present. The prices of all other construction inputs and labour has increased in
similar way during the same period, he added.
This further highlight the necessity to amend the twenty-year old
construction by-laws to encourage the construction expansion which at present is only
possible vertically, he stressed.
The official statistics show that the overall urban population at the
national level in Pakistan has increased from 28.3 per cent in 1981 to 32.6 per cent in
1998. The quick urbanization has put a tremendous pressure on the local construction
industry to meet an already huge backlog of 4 million housing units, the bulk of which is
concentrated in Karachi.
The pressure will show no signs of ease as by the year 2003 it is
estimated the fast urbanization would increase the population in urban areas to 50.8
million, 7.9 million more than the 42.9 million it accommodated by end last year.
The failure of the real estate slump to draw buyers is an indication
that the prices have already gone beyond the purchasing power of the most Pakistanis,
particularly those in the middle and low income group. Measures to stabilise the
constantly increasing prices of such basic construction materials as cement, gravel, iron
bars, lumber and other inputs should be devised to stabilise the construction prices for
the benefit of people. The need to amend the construction by-laws to bring them in harmony
with the socio-economic realities of today should also be addressed on a top priority