REAL ESTATE INDUSTRY PASSING THROUGH TURMOIL
The real estates business crashed in March-April when the speculators entered the market with a big bang.
FROM KHALID BUTT, LAHORE
Feb 20 - 26, 2006
A Rs. 50 billion real estate industry is passing through turmoil. The crisis has deepened, as there are no ready buyers. Prices have gone 50 percent lower but the deals are not finalized. It was a psychological collapse, said a broker. The chances of revival are remote and it may take months to revive the lost image. In recent months it witnessed worst-ever rash when 30 to 40 investors started selling land just in files and transactions were finalized on token money. Gambling out-placed the genuine investors and according to a reliable estimate speculators lost Rs 15 to 20 billion in one go. In case the SECP brings out the names of those responsible for scam in share businesses, then it would be exposed that the same people had created a fuss in the property market.
Already during the last couple of years the prices of immovable property, reaching the highest mark, have become unbearable for the common dwellers.
Pertinent to mention is that a couple of months before the announcement of the new budget, the real estate business in the country was facing a serious slump because of two factors: the stock market crash and the rumours of tax enforcement on real estate trading. A month before the new budget, sale and purchase in real estate had almost come to a halt, said Hafiz Muhammad Ashraf, a real estate dealer in prime commercial areas such as Abbot Road, Davis Road, Egerton Road and Mason Road.
As the government dropped the tax, however, the real estate business started gaining momentum, especially the trading of files which is a hot favourite and speculation prone area of the industry, said Choudhry Qaisar Mahmood, a file-trader in Defence. Citing a personal example he told of a friend who sold his residence for Rs. 6 million and started searching for a house ranging from Rs. 5-6 million in Lahore's posh areas such as Shadman, Iqbal Town, Gulshan-e-Ravi and Samanabad. However he could find no such accommodation matching his price range in the said areas.
A senior land broker said that during his 30 years in business he has never seen such turmoil. Land prices had always shot up when Benazir was in power. He remembered the good old days of 1988-90 and 1994-96 when prices of land in DHA shot up and a genuine boom was seen. But the recession came after Nawaz Sharif went for nuclear testing in 1998, but even that downslide was not as bad as it has been now, he said.
Crises in real estate in Defence, particularly in Phase VIII, have touched rock bottom. The estate agents believe that prices have fallen by more than 40percent but still there is no ready buyer for the property. The price has to come down further to attract the genuine customer. It is hoped that property business would see a comeback in July or August provided the prices come down again. They are quite optimistic about the market revival, which is passing through a depressing stage. Market has a potential to grow but it would take sometime as people have lost their fortunes. The DHA has made it mendatory that the buyers and sellers should be present at the time of sale. The estate agents have opposed the idea and called it a derogatory step while DHA maintains that this rule would check the ghost speculators minting money and damaging the image of the real estate business in and around DHA jurisdiction.
The real estates business crashed in March-April when the speculators entered the market with a big bang. According to information at least Rs.50billion turnover in the property transaction resulted losses of Rs.20billion in a month or so. 30 to 40 speculators and non-genuine buyers purchased the files and sold the plot on paper more than 5 to 6 times.
The reputation of the real estate business has suffered due to speculators and stockbrokers, who entered the business and formed cartel and have ruined the real estate market by excessively raising property prices through speculation and conjecture, stated the real estate agents. It is also believed that some of the 'Stock Tycoons' were also involved in the maltreatment of the real estate business. The same gambling by the same people was played in the real estate business, which flourished at the same time when stock was at its peek. Real estate business shattered when stock exchange crashed. The gamblers manipulated the gimmick of DHA and the real disaster is being faced by the real estate business.
Commercial plot of 100 yards was sold at Rs.10 million and 500yards residential plots for Rs.1.5million or so. All the transactions were non genuine as the plots in Phase VIII, purchased and sold would not be habitat for another 10 years. These plots are in a jungle and for a distance you see a heap of sands for which the money was given on exchange of papers.
The reputation of the real estate business has suffered due to speculator and stockbrokers who entered the business and formed cartel and have ruined the real estate market by excessively raising property prices through speculation and conjecture. These remarks were made by a panel of real estate agents while exclusively talking to Money magazine recently.
The panel included President of Real Estate Association DHA Mohammad Arif Malik, Market Analyst & Investment Strategist Aurangzeb Khan, Mohammad Naeem Khan, Imran Ali Chhajra, Altaf Ellahi, Tahir Iqbal and Ejaz Alam Siddiqui.
Mohammad Arif Malik, who has been associated with real estate business for the last 40 years, said that those people, who were in disguise of real estate agents, must be given severe punishment as they plunder and deprive people of their hard-earned money by taking advance for selling and purchasing properties and taking their heels.