The current real estate market situation in Pakistan has been subjected to development and growth in recent years. According to Statista.com, the real estate market in Pakistan is anticipated to reach a value of 2.1 US trillion dollars (PKR 585.27 trillion) in 2024
Furthermore, the residential sector governs the real estate market with an expected market volume of 1.49 US trillion dollars (PKR 415.26 trillion) in 2024. Moreover, the real estate market in Pakistan is projected to experience an annual growth rate (CAGR 2024-2028) of 7.04%, resulting in a market volume of 2.77US trillion dollars (PKR 772 trillion) by 2028.
Additionally, the current real estate market situation in Pakistan has been experiencing a flow in demand for luxurious apartments in the major cities.
The above table shows that the residential sector (apartments and homes) is growing and will continue till 2028. Here, you can see that the residential sector dominates the commercial sector.
Factors Affecting the Real Estate Market in Pakistan
Highest Rate of Urbanization
In the South Asia region, Pakistan has the highest rate of urbanization. 38.2% of Pakistan‘s population lives in urban areas. Furthermore, according to UN Population Division estimates, by 2025, nearly half of Pakistan’s population will be shifted to cities. Moreover, urbanization not only suggests higher per capita income but also indicates higher employment opportunities.
Deficits Of Homes
Pakistan faces an enormous housing shortage of around 10 million units, and the housing issue is still growing. In Pakistan, the demand for houses is nearly 60,000 thousand per year. The government and semi-governmental bodies like DHA deliver 20,000 houses to fulfill the demand for homes. On the other hand, 40,000 house supplies have been fulfilled by Pakistan’s private sector.
Interest Rates On Loans And Property
In the current real estate market situation in Pakistan, interest rates have a vital role in the growth and development of the real estate market. People will not buy property if the government charges high property taxes. On the other hand, if the tax rates are high, people will try to invest in other businesses. Moreover, property sales shall go up if the government will be providing tax relaxation to property holders.
Likewise, banks in Pakistan offer loans on easy terms and conditions so that people may invest in real estate. On the other hand, those on the Active Taxpayer’s List are charged 3%, while those not on the Active Taxpayer’s List will be charged 6%. Thus, the government of Pakistan has been trying its best to provide maximum relaxation to the taxpayers.
The Economy
The economy is one of the most critical factors in attracting investors. Consequently, the growth of the real estate market shall increase. In the current real estate market situation in Pakistan, certain critical factors, including job employment, high purchasing power, financial stability, and a good GDP of the country, make investors invest in the real estate market in Pakistan. If the economic condition is not stable, people will not support it. Thus, a good and tough economy makes a base for a flourishing real estate market.
Demographics of the Country
According to the Merriam-Webster Dictionary,
Demographics refers to the statistical characteristics of the human population (such as age or income) used primarily to identify markets.
Demographic data might have a direct influence on the real estate market in Pakistan. For instance, the socioeconomic status and age group. Those earning well and belonging to the middle or elite class can invest in the real estate market, which will positively impact the market.
Structure of the Real Estate Market In Pakistan
Real Estate Market refers to the transaction of residential and commercial properties. Residential properties include apartments and houses, while commercial properties include offices and industrial properties.
Residential Real Estate includes
- Residential Real Estate Leases
- Residential Real Estate Transactions
Current Situation of Real Estate
Because of urbanization, the real estate market in Pakistan has been growing steadily. Let’s talk in detail.
Client Preferences
Customers in the real estate market have been showing enthusiastic preferences for investing. Certain factors affect customer preferences. The client’s first preference is that he wants financial security for the long term. As the real estate sector grows, people have been investing in NOC-approved projects and showing less trust in other investment opportunities. The middle class of Pakistan is growing and has increased the demand for affordable housing. Thus, trust in the market is driving the real estate market.
Latest Trends in the Real Estate Market in Pakistan
Furthermore, datareportal.com shows that 61.8% of people will be in villages in 2024. Again, according to World Bank data for 2022, 62% of people live in rural areas.
On the other hand, urbanization in Pakistan is growing, and people have shifted to urban areas. Furthermore, 38.2% of Pakistan’s population lives in urban areas.
Rapid urbanization and growth rates have increased the shortage of affordable homes in cities, causing a surge in property prices. Moreover, the trend is expected to rise for getting higher lifestyle standards. Thus, people move to urban cities for jobs. Furthermore, the societies have offered various facilities and amenities, gated communities, and security features. Hence, urbanization is leading to the development of new housing ventures nationwide.
Cash-based and Informal Transaction
In ordinary circumstances, cash-based and informal transactions are prevailing. Most of the deals are done by informal channels or without proper documentation. Because of these corrupt practices, sellers and buyers face many challenges. Thus, it leads to fraud and disputes over property ownership.
Macroeconomic Aspects
The present country’s population of Pakistan is 245,209,815, 1.96% higher than in 2023. Thus creating demand for commercial and residential properties. The government has encouraged investors to invest in the real estate sector, offering tax incentives.
Under section 236C of the Income Tax Ordinance 2001, any person responsible for registering, recording, or attesting transfer of any immovable property has been designated accountable for collecting advance adjustable Income tax from the seller or transferor. The rate of tax collection is 3% of the gross amount of the consideration received by the seller or transferor in case of the seller’s or transferor’s name if appearing on the ATL (Active Taxpayer’s List) and 6% in case of non-ATL seller or transferor.
These measures attract local and foreign investors, subsequently growth in the real estate market.
Significant Problems In Pakistan Real Estate Market
Illegal Housing Societies
According to government documents, 69% of housing societies in Pakistan are not illegal, stated The News International. Furthermore, 6,000 housing societies out of 8,767 are not recorded with the competitive authorities of Pakistan. Moreover, these societies need the complete documents. Because of these illegal housing societies, the general public has to bear the loss.
Untrustworthy Claims or Fraudulent Activities
Most housing societies have been advertising deceptive claims about the features of a venture, such as commercial plots, residential plots, offices, houses, rental spaces, apartments, etc. Furthermore, the societies claim to have basic facilities, open areas, zone details, quality of end projects, etc. Because of these lucrative claims, investors are attracted to these societies, and high prices are charged for those projects. In addition, the claims made in the advertisement need to be fulfilled, and projects need to meet the quality compared to what is advertised in the ad.
The customer must do a little research before investing in any housing society. Research will let you know the complete details of any project. By doing research, you can be saved from deceptive claims, and your financial investment could be secured for the long term.
Lack of Basic Facilities
Most societies need the availability of fundamental utilities, including electricity, water supply, gas, carpeted roads, drainage, and sewerage. Despite that, most societies make a sound claim in advertisements.
Delaying In The Projects
Sometimes, societies make a promise to deliver a project on time. Though all the payments have been made, the project must still be handed over to the customer.
Lack of Regulations
Currently, many regulations have been in the queue to deal with and at different levels of governance. Therefore, there needs to be a coordination process among all relevant agencies. Thus creating intense instability and problems in the real estate sector. Furthermore, the regulatory bodies at the federal district levels face more synchronization between each, creating a loophole in the system.
Favorable Government Policies After Elections
The last elected Government in 2018 had announced an amnesty scheme at the rate of 5% for those who would bring investment in Pakistan. Amazingly, Pakistan’s real estate market showed stability.
On the other hand, the new Pakistan Government elected in 2024 should get the same amnesty scheme to boost the real estate market. Furthermore, it is anticipated that the new government shall offer the construction amnesty to facilitate the construction in the country. Moreover, the construction shall be given in the form of reduced construction taxes, resulting in better growth of the country’s real estate market.
Disclaimer
The fundamental purpose of this blog is to inform you about the latest trends in Pakistan’s real estate market. Further, this blog is only for awareness and education purposes. We have collected the information for your convenience so that you may come to know what is happening in the market.
Please consult with real estate professionals to invest in Pakistan’s market. Hence, we are not responsible for any loss.
Waseem Ali chose writing as his career after completing his M.Phil. in Communication Studies from Communication University of China (CUC). With a research-oriented approach, he currently works as a research content writer with us. He enjoys research, insightful studies, and traveling.