While the fundamentals of the national economy have
shown a strong improvement during first half of the current financial
year, the real estate sector is also not an exception and seems to take
The real estate sector, which is said to be the
sector comes last to be affected by the economic crisis and the first to
improve when the economy gets revived.
It may be recalled that the real estate sector had
come almost at a standstill reaching almost to a collapse some two years
back. The prices of the properties had gone down even less than 50 per
cent in the market. Except the necessary sale and purchase, the
investors had shifted their investment interest from real estate to
other sectors and the investment in dollar was considered as the safest
mode of investment.
Consequently, over 80 per cent allied industries such
as cement, iron and steel, glass, paint, wooden work, marble tiles and
other tile manufacturing units, ceramics and sanitary and a large number
of other allied industries were sitting idle after the lay off of large
number of the workforce.
Besides overall economic depression, one of the major
reasons for a downfall in the real estate business was the government
policy of documentation in the real estate sector. Since the culture of
documentation has always been missing in most parts of the economy,
people got frightened of the government drive for documentation of the
hidden assets and the hidden wealth. Although the drive brought of over
Rs.12 trillion of hidden assets throughout the country, which
contributing about Rs12 billion revenues to the exchequer but at the
cost of total collapse of the construction and real estate sector.
Realizing the importance of the construction industry
as well as the real estate business, the government come out with
policies to rectify the situation. Although the situation has not been
fully revived, yet there is a sign of revival due to various other
factors contributing to bring life again in this dead sector.
Among other factors which played an important role
for revival of the real estate business is the shift of the interest of
the investors from dollar which once was the safest haven for investment
without any fear of documentation. Dollar was so strong that when the
government in 1998 had freezed the foreign currency accounts and had
announced conversion of dollar account into rupee, people had gone even
to supreme court against this decision. They were insisting that they
should get back their accounts in dollars instead of their conversion
into local currency.
However, the events of September 9/11 changed the
entire situation. For the first time in the history of Pakistan, people
started getting their dollars converted into local currency.
Whatever the factors may be, the pace of home
remittances sent by Pakistanis living abroad also got accelerated
improving the liquidity position of the financial sector to more than
satisfactory position. The remittances from overseas Pakistan jumped to
such an extent that during the first six months of the current fiscal
year these remittances amounted to $2.148 billion. Financial experts are
so optimistic that the total receipt on account of home remittances may
touch the unbelievable figure of $5 billion at the end of the current
These enhanced home remittances as well as the
government policies helped to revive the real estate sector in Pakistan,
the experts said.
Experts are of the opinion that the growth of the
construction industry and the real estate sector which are closely
inter-related to each other can open tremendous economic activity
provided the impediments which are stalling the growth are removed.
There is an annual requirement of over 6 million new
housing units in Pakistan. However, the stringent and limited resources
for house financing are prove counter productive.
The House Building Finance Corporation, the only
source for house financing which remained inoperative for over two years
after the decision of the court for islamization of the banking sector
has now resume disbursement of loans but with highly complex and
difficult procedures which generally keep the common man out of its
According to new rules, if a client in the age of 45
years gets the house building loans from HBFC, he has to payback within
ten years upto the age of 55 years. That means higher installments of
higher amounts. The borrower is required to submit 240 post dated
cheques as the guarantee for repayment of the loan. Citizens over 50
years of age are not eligible reasons for mushroom growth of Katchi
abadis all over the urban centers in Pakistan.
Although the finance minister Shaukat Aziz has
acknowledged the need for over 5.35 million housing units in the country
and has advised the commercial banks to start housing finance scheme,
yet nothing tangible has come out so far. The finance minister has also
blamed the banks for ignoring the vital housing finance in their
operations depriving the constructors and the developers of funds and
banks of profit which they could have earned from this sector. The House
Financing scheme should be included in the poverty alleviation program
by the government so that the shelterless could see their dream of
owning a house comes true in this country.