Strong signals for a turnaround


Jan 20 - 26, 2003



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 a turnaround.

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 financial year.

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 domain.

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.