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Real estate prices had jumped unreasonably mainly because of speculative business deals by the real estate agents

Oct 17 - 23, 2005

Like other parts of the country, the real estate in Islamabad also reached a new high in the last few years after 9/11. Expatriates from US and Europe, feeling unsafe over there stared sending their un-invested dollars to home country. They remitted over $ 7 billion during 2002-04 and most of it went into real estate business considering it to be the safest investment.

As a result real estate prices had jumped unreasonably mainly because of speculative business deals by the real estate agents. Realities started dawning by early 2005 as a sudden and drastic decline in real estate prices came as a serious blow to the speculators. Despite fall in the prices during the last nine months there are no buyers of the plots and there is practically a slump in the real estate market in Islamabad these days. In this process the Capital Development Authority (CDA) has gained tremendously as it has been asked by the government to develop four new sectors in addition to expediting development work on the 3 existing sectors, in order to provide plots to the low income group and middle class at affordable prices. It has almost doubled the prices since last year but these are still cheaper than the prevailing market prices. As a result the CDA received over 15 lac applications for the allotment of about 5000 plots of different sizes in the already acquired land in I-15 sector.

The government is rightly focusing its attention on housing and construction industry, as it is the most vital sector of Pakistan economy. The federal government, in close coordination with provincial governments, is giving final touches to a new policy to take serious view of the mushroom growth of fake housing societies in the country which are fleecing the innocent people. Actions have been initiated against them. Under the new policy, shopping malls, plazas, flats and housing units will be constructed by diverting capital from plot business to construction sector. The government will take advantage of present heavy investment in real estate business by shifting it to productive side.

The new policy will enable the government to achieve its goal of promoting economic activities as information technology, telecom and construction sectors can generate extensive employment opportunities to reduce level of poverty. At present, billions of rupees have been invested in the estate business, particularly in plot business which is unproductive and people have been trapped in fake housing societies. The 42 allied industries of housing sector can only be pushed forward if investment is attracted for construction sector.

Prime Minister Shaukat Aziz who is in full picture of the present situation has already directed the Chairman Capital Development Authority, Kamran Lashari, to come up with plans to open new sectors, construct shopping malls, and housing units to narrow gap of supply and demand of housing units in federal capital. It will also help maintain estate prices at reasonable level. The Housing Ministry has advised Islamabad Capital Authority to make arrangement for 100 acres of land in Islamabad to construct housing units. The letter on the same lines has been written to provincial governments to allocate land in each district for this purpose. Similarly, provincial governments are also engaged in preparing policies to divert huge investment from plot business to construction side which are expected to be in place in a short span of time, sources said.

According to official figures, Pakistan is facing a shortfall of about 6 million housing units, but the reality is that this figure is more than 7.5 million units. The demands of housing in urban areas of Pakistan are increasing at the rate of 8 percent. For the present population of 150 million, the country needs 25 million units but have only 19 million units leaving a gap of 6 million. To meet present demand, 0.7 million housing units are required to be built per annum and to meet the backlog in 20 years, 0.3 million more units would be required, i.e. about 1 to 1.1 million new housing units per annum have to be built in the next 20 years.

Access to affordable urban housing is an increasing problem as population pressure and land prices rise. First priority in urban housing would be the provision of land at affordable prices. For efficient supply of land to the low-income group utmost care should be taken to discourage the speculators and middle men/classes. A large proportion of small size plots need to be demarcated, so as to avoid premiums on their sale. Ownership documents should not be issued unless a house is built, all development charges are cleared and the house occupied by the owners/tenant. Unauthorized settlements including the Katchi Abadis and slums have become a part of the urban scenario, and there is need for their regularization together with extension of services to enhance living conditions and to bring them under the property tax net.

In the recent years increasing costs of housing plots are the woes of the poor and the middle class families who want to acquire their own house with their life savings. In large cities in particular, the problem of high property prices is the main impediment and the biggest constraint on a poor family's ability to acquire shelter. Under the existing cost of land most of the salaried persons serving in the federal and provincial governments or even in the semi autonomous bodies cannot think of acquiring a reasonable size of plot in cities like Islamabad, Lahore and Rawalpindi. Non-profit organizations, like Capital Development Authority (CDA) and purely welfare-oriented organizations like Federal Government Employees Housing Foundation (FGEHF) are also increasing the cost of land and development charges in the line of exiting market rates. Sometime, they increase the cost of plots indiscriminately and without any logic. For example last year (2004) FGEHF launched a housing scheme in sectors G-14 and G-15 in Islamabad for the federal government employees with reasonable cost of plots. But in a short span of only 9 months the costs of plots were increased by 135 to 137 percent. The revised cost of the smallest plot size (25X40) has been increased from Rs 140,000 in August 2004 to Rs. 328,560 in June 2005, which is beyond the reach of any government servant whose only source of income is salary.

Moreover, cost of other construction materials like cement, bricks, iron-rods are also increasing almost in the same proportion. Some unscrupulous property developers who are earning windfall profits at the cost of poor people are also engineering the current escalation of prices of real estate. If the cost of housing plots in the major cities remain high and at the mercy of property developers, owning a home for shelter shall remain a fancy dream to millions of poor people in Pakistan.


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