The situation calls for immediate correctives steps: experts


From KHALID BUTT, Lahore
May 09 - 15, 2005



After over a month of the crash of stock market, the much-trumpeted real estate business in the provincial capital of the Punjab is showing a mysterious slump.

In fact, for the time in the history of this, the commercial banks and other financial institutions opened their doors to the consumer financing especially with their house financing products an affordable interest rate 7-8 percent, was of course a major factor behind the booming real estate which also ignite a spark among the builders and the developers all around the country.

The helping out attitude of the provincial government and comparatively better law and order situation in Lahore had become the focal point of the investors especially in the real estate business. According to an estimate, over 70 percent of the builders and developers had moved from Karachi to Lahore to grab the market share.

It is said that the real estate business being the most sensitive indicator of the economy reflected the shadows of the coming events. The real estate experts were of the view that the situation calls for immediate corrective steps into the factors responsible for a serious disruption to otherwise fast growing real estate and the construction industry.

It is interesting to note that as compared to administrative and procedural complexities in the province of Sindh in general and Karachi in particular where the builders and the developers have to deposit huge security prior to launching a project and stamps duties etc, the real estate business has been given almost a free hand in Lahore in conformity to the government policy to use this sector as an engine for economic growth.

Resultantly, Lahore had assumed a leading role in the real estate business by attracting investors not only from all over Pakistan but the non-resident Pakistanis as well. According to a senior banker of Lahore, the demand for housing finance as well as the market price of the real estate was more than double from what it was in Karachi.

However, this ballooning trend was suddenly pricked to the surprise of a large number of small and big investors in Lahore.

For the last one month, the sale and purchase in real estate business, especially the major transaction in Lahore has almost stopped, said Hafiz Muhammad Ashraf, the owner of a real estate agency, dealing in prime commercial areas in Abbot Road, Davis Road, Edgerton Road and Mason Road. "We are only doing business of rent these days and looking for customers to strike deals for various residential, commercial plots, residences, shops and offices for the last one month," he said.



Different perceptions about impending crisis in real estate, very high prices, levy of federal tax in coming budget, ongoing crisis at stock market, upcoming political crisis and rising rate of interest are some of the major factors that are keeping investors away from real estate business, said Hidayat Ali, another dealer who is doing the same business in Defense areas for the last 10 years. He said that the trading of files was gradually going on, but no sale and purchase transaction was taking place in real estate business these days.

He pointed out that in last three years, the real estate has attracted billions of rupees of investment as a result the prices of plots, shops and residences have reached the highest level.

Hundreds of investors, expatriates and countrymen have invested their surplus capital in this business which gave a boom to prices and a quick and hefty dividend to investors, he said.

How much the prices of property have expanded can be imagined from the fact that one of my friends in Karachi sold his residence worth Rs6 million last month and now he was looking for a residence in posh areas in Lahore like Shadman, Iqbal Town, Gulshan-e-Ravi and Samanabad, having range between 5-6 million rupees, but during last one month the person could not find a single accommodation matching his price range in the said areas, said Choudhry Qaisar Mahmood, another dealer, engaged in the sale and purchase of files of plots in Defence and adjacent areas.

"We have a number of residences, shops and offices for sale in posh areas, but we are not finding customers these days," he further said.

He said that a mysterious silence is prevailing in the real estate business in Lahore that is very embarrassing for the dealers and disappointing one for the owners, who want to dispose of their immovable assets for different reasons.

He said that the rumor of imminent political changes in the country has become a talk of the town in Lahore that has given a blow to sale and purchase business in real estate.

He said that stock market crisis has made investors cautious who have also sidelined and are waiting for a blow over to the sky high prices of property.

During last couple of years, it was a common trend that some major investors used to make heavy investment in one of their selected schemes and areas, he said, adding they used to dispose of the immovable property as soon as they got a better price. He said that this trend was giving boom to real estate business, but it has now vanished, leaving the stakeholders high and dry.