Buyers must invest in commercial projects


May 16 - 22, 2005



Real estate reached a new high after the events of 9/11 and soon became the talk of the town. Every person, high or low, jumped on the bandwagon to make a quick buck. I have dwelt on this aspect in detail in my previous article entitled "Real Estate what are the realities" published in the national press. I stated that Pakistani expatriates from the US and Europe remitted 7 billion and 50 million dollars to their country. Much of the money went into real estate business. Prices rose enormously when a few property dealers teamed up with their investors and speculated freely in plot files. Granted every trader wants to make a profit but in this frantic pursuit no heed was paid to rules and regulations. In earlier article, I pointed out that regardless of the fate that would befall the officials and traders involved in this trade, the impact of this craze would be negative on real estate. And so it was. According to a press report, nine property dealers were blacklisted and their lands and assets frozen. A few officials were also arrested.

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 not to sell it but to build a house, went up in smoke. The prices were beyond his reach. As in the past, the dollar was once looked at and treated as a commodity; now real estate turned into one. Stock markets and real estate displayed a tendency to slump at one and the same time. In the past, matters were different. If the stock market plunged, real estate would boom and vice versa. It clearly indicated that artificial methods created an artificial hype. This hype, haphazard and totally unplanned, is fast reaching its logical end. Stock markets, particularly the KSE, headed for a collapse. I am not much privy to the working of stock markets. It has not been my area of interest and I have never been engaged in it. In the good old days, there was a yardstick to measure real estate business. Now there is none. Hype alone is sovereign at the moment but would lose its hold in the near future. None can alter the dictates of hard reality by just creating an artificial hype.



As stated above, tremendous capital flowed into the country after 9/11. A large chunk of it went into real estate. I, therefore, fear that this business will see yet another upsurge: firstly, because there is sizable capital in circulation and secondly, because vested interests are trying their utmost to maintain and prolong the artificial hype as no alternative opportunity is there for a quick buck.

I do not subscribe to such dubious business practices. I have not bought a single inch of land in the suburbs where unlimited land is available and speculation is at its peak. Many a buyer is marching in that direction. As a result, sellers have inflated the price of land out of all proportion. The Rafi Group, too, could have made hay while the sun was shining but it desisted because they believed that a business venture given to immoderateness could never be stable. Moreover, it is absolutely opposed to the code of business ethics.

In every business, be it real estate or some other, there is hype but it is a natural hype. Natural hype arises out of extensive capital circulation or external factors and comes to an end as a result of political instability or change in government policy. Artificial hype, however, meets its doom when the buyers pull out. It is, in fact, already going down hill.

I have stated above that Rafi Group kept away from such artificial business pursuits. It focused entirely on its two commercial projects, the Defence Shopping Mall and Empress Towers, and both are moving ahead successfully. The sort of artificial hype referred to above had no adverse effect on the said commercial projects. Prices have remained firm and stable in the commercial projects and buyer has not suffered any loss whatsoever or will not suffer in future as well. Artificial hype has proved profitable to only a small percentage of traders but is likely to ruin a large number of people. I, therefore, exhort the buyers to invest in commercial projects, particularly in those which stand completed. Investment in commercial projects is above board; clean and transparent. The more the business activity in a commercial projects, the more the rise in the prices of offices and shops. The price of a shop here is, therefore, understandably not measured in square feet but estimated according to its business worth. There is no question of speculation in this domain because the commercial projects are not suspended in mid air but stand on firm foundations. A business based on speculation is indeed a reckless one and fluctuates freakishly like a pendulum. Such a business generally plays havoc with the people.

I, therefore, recommend the buyers once again to shun business that is based on mere speculation and invest in commercial projects that stand constructed and completed in every respect.