REAL ESTATE DEVELOPMENT OUTLOOK

INTERVIEW: SYED S. HAIDER, PRESIDENT & CEO VIP ESTATE

AMANULLAH BASHAR
(feedback@pgeconomist.com)

July 2 - 8, 20
12

Lack of infrastructure facility, poorly managed utility services especially electricity, water, and gas supplies, high rate of financing and above all the horrifying law and order situation altogether have a negative impact on property development and investment growth in Pakistan.

Yet snags are always of temporary nature and ultimately have to be tapered off with the return of normalcy in social order as well as economic and political stability. In the backdrop of fast changing lifestyle and living standards of a considerable size of middle class population, the real estate development can be safely described as the dominating and the most vibrant business in the days to come.

Giving a comprehensive view of the real estate development in Pakistan, Syed S. Haider, the President & CEO VIP Real Estate, one of the leading real estate players in Pakistan, said that this important sector is experiencing paradigm shift and the past is subject to rapid change.

The prestigious Creek Vista project in the heart of Defence Housing Authority Phase-VIII portrays future development trends in Pakistan.

Like Emaar, other developers too enjoy brand equity among sizable community in Pakistan, gulf estate, Saudi Arabia, and all over the world.

Due to the forecast of continuing demand several large real estate developers from gulf estates, Saudi Arabia, Indonesia, Singapore and other overseas entities have shown interest in Pakistan's real estate.

In fact, Pakistan is one of the world's emerging markets and overall dynamics of economy are attracting investment in real estate.

The reputable developers may make the difference from traditional to modern development for better marketability and profits. Besides, the overseas Pakistanis after 9/11 have played a big role in investing real estate viz. plots of land, housing units, commercial and retail properties. It can be said with confidence that this trend shall continue. Due to liberal government policies more investments are made.

Government national housing policy has declared housing and construction as industry, hence the real estate is the largest single sector in terms of assets, growth and development in the country.

The practices and fundamentals of real estate are now initiated and with the passage of time, these shall be followed at par with international markets and experiences.

Mr. Haider observed it has never been in focus before, because there was perhaps no need and only few knew the secret of real estate, profits and growth.

But now it has become a common man's knowledge, particularly institutions and business entities, even nonprofit organizations wish to have there own piece of stock of real estate/property. It is said that real estate had brought fortune to those who kept it. This phenomenon has become essential part of the entire economy-whether it is on country, entity, or common man basis.

Mr. Haider was of the view that the investment in real estate shall be of immense value particularly for long term investments, rents, portfolio development, competitive edge and several excellent beneficial features for corporate entities. It is worth mentioning that few of the financial and even other institutions maintain excellent real estate portfolio by owning the properties as their head offices and branches, he said. Among others, the prominent of these institutions are including Habib Bank, ABN Amro Bank, Muslim Commercial Bank, Allied Bank, Saudi Pak Bank, Sui Southern Gas, Bank Alfalah, World Trade Center, Karachi, Islamabad Stock Exchange, Karachi Stock Exchange, and Finance & Trade Center (FTC), he added.

When asked to describe the impact of the endeavors of the government for 100 per cent documentation in business deals including transactions related to the real estate business, the veteran realtor said that with the documented payment the cost of transaction may increase by 20 to 25 per cent and even the seller may refuse to sell the property except corporate and other sellers, who have the provision to sell at 100 per cent documented price.

Actually, the word real estate (R.E) is only used for land, on land, its value added products viz. (1) agriculture land, (2) industrial land, commercial land, (3) residential land, (4) apartments, (5) houses, (6) shops, (7) offices, (8) buildings, (9) recreational lands, (10) golf courses, (11) marinas, (12) marriage halls, (13) mines, (14) marshy lands, (15) oilfields, (16) gardens, (17) farms, (18) seaports, (19) airports, etc. However, we shall not mention details and working of above types, but shall be restricting only to commercial and residential real estate-open plots and construction, he said.

EMERGING URBAN CENTERS

How do you see trends in property development in Pakistan? Actually, future growth of urban centers in Pakistan, depend on investments in above R.E. The commercial retail and office spaces presently have huge shortage in Pakistan particularly Karachi viz. shopping malls, shops and showrooms, recreational and family places, children parks, community places like clubs and resorts commercial playing fields and grounds, cinemas, entertainment and several others.

According to him, if fundamentals of real estate are taken care, then over a period of five to 20 years, prices of real estate of Pakistan's large cities such as Karachi, Islamabad, Lahore have witnessed 30 to 40 per cent and in some cases up to 75 per cent increase per year, said Haider.

The lower large cities like Hyderabad, Sukkur, Multan, Faisalabad, Gujranwala, Sialkot, Quetta and Peshawar, etc. have also witnessed 30 to 40 per cent increase per year. This also applies to land, which can be used for present expansion of the large cities and future emerging cities. This is also applicable to commercial, retail, and business properties.

The population increase is three per cent per year viz. approx. 500,000 per year of population of approx. 170 million. Population growth is taking place on yearly basis and there is no sign that it may go down in the next 10 years to 15 years. This scenario of present population and increase attracts huge market. Rapid change in social structure-joint family system is under pressure. Presently, six persons live per unit. However, this is declining and in the next years, it may be down to 3 to 4 persons per unit, thus creating further large housing demand.

Due to changes in life styles, having more facilities and amenities, per unit price has increased. If the banks and financial institutions behave more liberal for housing loans at an affordable rate, it will create activity in this sector on the back of demand growth, he said.

About demand growth for housing units, he said there is a backlog of seven million housing units, which increases by approximately 300,000 units per year. Current need is approximately 600,000 per year, whereas only 325,000 units become available every year, thus a further backlog is created for which more demand of land and construction is needed.

To clear backlog of 7,000,000 units (if we take only average per unit price as Rs300,000 then Rs2100 billion are required. Every year 570,000 units are required and to meet this, Rs171 billion is to be spent (the value of housing unit is mentioned on a very lower side i.e. Rs.300,000) while only 300,000 units become available every year.