Real estate trends: a recap of CY13

For anyone who is out in the market to buy a piece of residential land for investment purposes, let us start off by saying this: we feel your pain.
The dubiety shrouding Pakistan’s real estate landscape is after all the stuff which legends are made of. Ponzi schemes, realtor frauds and unauthorized housing societies abound in the backdrop of genuine demand and flimsy regulations - all making for an environment that breeds confusion and deters investment.
BR Research, however, has recently been on something of a ‘real estate bender’ – largely in a bid to demystify and collect the sparsely available information for potential investors. To this end, we consulted some of the sector’s leading movers and shakers - for data support where possible and expert opinion where applicable.
And the verdict is unanimous: Residential real estate prices in all three major cities are on the rise. Showing different degrees of upsurge - from flat to double digit year-on-year spikes - prices remained on the up, more so in the second quarter then the first, when investment was in a pre-election lull.
Following the elections, the first big jump in prices came at the hands of the Finance Bill 2013, which announced the government’s plans to tax moveable assets. In fact, prices of residential land touched their highest levels across the nation following the announcement in late June. Investors’ interest in real estate also peaked during the same time due to FBR’s plans to access bank accounts to collar tax avoiders.
Prices in Punjab during 2HCY13 were also influenced by strong underlying demand and the push from the newly instated government’s steps to digitize land records in the province.
The hubs of growth in all three cities have been the same: housing societies where land rights are secure and real estate transactions are relatively transparent. “Serious investors are left with two options: they can either shoot arrows in the dark or invest in one of the ‘safe’ localities” agreed Zeeshan Khan, co-founder of Zameen.com, which is also our primary source of statistical information.
Biggest exceptions to that trend, however, have been the localities surrounding Lahore’s Ring Road. Experts say that with the completion of the northern loop of the road, prices of land in adjoining societies such as HBFC, Sui Gas and State Life have already more than doubled over the past year and will continue to rise.
In fact, not only does the Ring Road offer a quick connection between the city’s economic hubs, the realtors also believe that it has had an overall positive effect on the city’s real estate, having strengthened prices of several of DHA’s adjoining phases including 5, 6, 7 and to some extent 8 as well.
The rest of Lahore’s market meanwhile is believed to be going through a corrective phase. Prices in Islamabad on the other hand have seen the biggest capital gains of all, with prices for 1 Kanal plots in Bahria Town touching the same level as those in DHA Lahore.
Industry sources argue that inter-city migrations from Karachi and KPK to the twin cities are responsible for these increases. In comparison, CDA controlled areas including F-11 and G-11 have shown comparatively smaller price accretion over the last year, due to lower availability of plots and a generally slower market.
Karachi on the other hand, remained a city with a lot of pent-up demand. Supported by strong population growth and an intra-city migration trends, the city’s residential sector saw a healthy growth in CY13.
“Restricted purchasing power and the exorbitantly high prices of land in the super expensive southern reaches of the city has residents trapped, leaving them with limited options,” Rashid Chohan of Chohan Estates told BR Research. Nonetheless, a lot of people are moving away from violence struck areas and the general lack of supply has helped buttress rates of property and land in areas like Gulshan-e-Iqbal this year.
Note: Beginning today these columns would carry a review of Pakistan’s key real estate markets once every week. Your suggestions and feedback are welcome.

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National price trend for 1 Kanal residential plots

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Rs (mn)                 1HCY13     2HCY13      chg

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DHA Lhr                   11          14       24%

DHA Khi                   21          23       23%

Bahria Lhr                 8          10       24%

Bahria Isb                 9          17       31%

Sector G-11/F-11 Isb      35          42       20%

Gulshan-e-Iqbal Khi       13          17       30%

Gulistan-e-Jauhar Khi      8           9       10%

Lahore Cantt              26          27        3%

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