Real estate sector is globally recognized as the backbone of a country’s economy. Like most countries around the world, it is one of the strongest foundational pillars of Pakistan’s economy, with 70% of the country’s wealth belonging to real estate. Due to this reason, this sector is given special attention by the private sector and governments.
In recent years, real estate in Pakistan has experienced exponential growth. A recovering economy, favourable incentives by the government, including tax cuts, unstable gold prices, and the booming success of CPEC have established real estate as the fastest growing sector of Pakistan’s economy in 2021.
To analyze the prospects of the real estate business in Pakistan, we need to explore the basics of financial stake and investment ideology and examine the factors that drive or restrain real estate development.
What is real estate?
To understand and define real estate, we first need to highlight the word real estate itself in a broader spectrum.
The term real estate refers to a piece of land and the infrastructure or building constructed on a particular land area. This term may also cover air rights above the ground and underground rights in a broader definition.
In business terminology, the real estate spans the construction, sale, and purchase of a property. Being a diverse subject, it can be divided into the following categories:
- Commercial Real Estate
- Residential Real Estate
- Industrial Real Estate
- Pieces of Vacant Land (Farms, Ranches, etc.)
Significance of real estate
Real estate is amongst the foremost drivers of economic growth. Its economic and financial proximity offers both micro and macro-level cash flows, equity building, tax breaks, competitive risk-adjusted returns, and a robust hedge to counter inflation.
Being one of the most critical sectors in the economy, the fluctuation in real estate rental and sale prices directly impacts the wealth of property owners/tenants and their consumer spending. Due to these aspects, this sector is focused as a critical consideration during the economic planning of governments worldwide.
Real estate business in Pakistan
The activity of real estate investment has been the most appealing and rewarding business in Pakistan for the past few decades. It offers both minimal investment risk and high-profit margins along with the certainty of safe investment returns.
Sector Brief
- Pakistan is the 5th largest country globally, with 220 million citizens, over 60 million labor force, and a growing middle class.
- Out of the total population of 220 million, 36.38% reside in urban areas, while 63.62% live rurally.
- There is an ever-growing demand for housing due to increased migrations from rural to urban areas and an annual population growth rate of 2.4%.
- According to the Pakistan Economic Survey (PES), the construction industry of Pakistan accounts for 2.53% of the total Gross Domestic Product (GDP).
- The sector employs 7.61% of Pakistan’s total labor workforce.
Dynamics
Most of the space in the real estate Pakistan market is occupied by traditional real estate agents who deal with clients through real estate business cards in the regional markets. The trend is set to pass through an evolving transition with the induction of more public-focused initiatives and the stimulation of technology in real estate practices by trusted and reliable names like Agency21 and Graana.com.
Real Estate in Pakistan – 2021
The real estate dynamics of Pakistan are riding a positive trend in 2021. Various factors have contributed to distinguishing real estate as the most cultivating sector of the economy. We are witnessing a more significant number of investments coming through local and foreign investors leading to an ultimate rise in construction activity and property deals throughout the country. However, the major driving factor in the brisk boom of the real estate sector is the government-led initiatives, including tax reforms and the “Naya Pakistan Housing Scheme”.
Government Support
From the past two years, the significance of the real estate business in Pakistan has surged drastically, owing to the favorable incentives of the ruling government. Revolutionary reforms in tax policies have provided numerous incentives to builders and developers, resulting in a general amelioration in construction activity. Some of the critical enticements offered by the government to uplift the real estate sector are as follows:
- The construction sector granted the status of an industry
- Exemption of withholding tax on the purchase of building materials
- Exemption of capital gains tax
- Various national and private banking schemes to assist house financing in the country
Naya Pakistan Housing Scheme
Naya Pakistan Housing Program is the flagship project of Prime Minister Imran Khan’s government. It seeks to provide a sustainable housing solution to Pakistan’s 20 million homeless population. The program showcases what the ruling government of Pakistan is giving to the real estate sector.
The initiatives rooted in this program have given a vigorous boost to the real estate activity in Pakistan. More real estate jobs are in the pipeline as the sector expects a massive need for a workforce in due course.
What’s the future?
The real estate sector of Pakistan is set to experience all-time highs due to multiple factors, including the ones discussed above. A growing population and the rising demand for housing present marvelous prospects for real estate businesses to grow and prosper in the coming years. Likewise, the real estate sector is set to lift all the associated industries providing robust support to the country’s economy.
Adding to the bright prospects, China Pakistan Economic Corridor (CPEC) has also given a splendid proliferation to the construction sector through the influx of infrastructural development projects.
Projected Growth
Albeit, the Covid-19 restrictions caused a worldwide decrease in Gross Domestic Product (GDP), public sector spending on infrastructure, and Foreign Direct Investment (FDI), the outlook of Pakistan’s real estate sector remains largely positive thanks to unprecedented reforms by the ruling government of PM Imran Khan through the reformation, enhancement in sector’s regulatory environment and provision of incentives and relief packages for the industries associated with real estate business.
As a result, the projected outlooks driven by vigorous construction activity remain highly encouraging for all stakeholders involved in the real estate sector of Pakistan.
What is the best time for investment in Pakistan?
Due to thriving economic conditions, both local and foreign investors have set eyes on Pakistan to make the most out of investor-friendly conditions in the country. However, the first thing that comes to your mind when you think about real estate investment is the time you are investing in.
If you are thinking to multiply your savings or financial assets then do not delay for another second, because now is the time when the property prices in Pakistan 2021 have decreased due to the relaxation of taxes. Today’s investments will reap great financial returns in the future when the demand soars further.
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