There is a strong correlation between Pakistan’s property market and its socioeconomic progress. Indeed, according to the State Bank of Pakistan’s first-quarter report, “The combined contribution of housing and construction in the country’s GDP has been continuously more than 9 percent.” Investment in real estate is often long-term and requires a large amount of money. Despite the high potential for profit, this kind of transaction carries significant risk. Investment returns in Pakistan’s real estate market rely on a variety of variables, which we’ll cover in further detail below.
Our current property search patterns show us that the country’s general real estate market is steady. Only a little dip or gain has been seen in the Pakistani real estate market during the last several months.
Take a look at some of the most critical aspects determining the success of Pakistan’s property market before moving forward with your investment. Increased Affordability of Consumers
- Interest Rate
- Investments by Overseas Pakistanis
- Budget and Taxation
INCREASING AFFORDABILITY OF CONSUMERS
The affordability of Pakistani customers has also increased significantly over the last several years. The emergence of start-ups, new forms of employment, co-working spaces, and freelancing in Pakistan is largely responsible for this surge in consumer affordability. Cities have seen a rise in demand for both residential and commercial assets as a consequence of rising consumer affordability. As a result of this, rural areas have not seen much of an increase in affordability during the last decade.
The demographics of any nation have a significant effect in the selling and acquisition of property. Property values and demand in Pakistan are also impacted by demographic divisions, much as in the United States. The joint family system and the nuclear family system are both prevalent in Pakistani culture today (in which individuals start living separately after getting married and having children). While nuclear families may readily fit in smaller homes and flats, extended or joint families demand a more spacious residence.
When it comes to purchasing a home, interest rates have a significant impact. Any change in interest rates, especially in Pakistan, has a significant impact on the real estate industry. Most homebuyers in Pakistan depend on banking institutions or real estate developments that provide appealing payment plans in order to acquire a house.
As a result of Pakistan’s volatile stock market, interest rates on real estate, as well as other industries, vary up and down as a result of these fluctuations. Affordability tends to be negatively impacted by rising interest rates. The lower the interest rate, the greater the demand for property in Pakistan’s real estate market.
INVESTMENTS BY OVERSEAS PAKISTANIS
In addition to the Naya Pakistan Housing Schemes, which are being built throughout Pakistan in various cities, there are also new projects like Golf City, which are ultra-modern residential communities and housing schemes.
As part of China’s massive Belt and Road Initiatives, Golf City is one of several projects tasked with transforming Gwadar into the region’s biggest free port.
BUDGET AND TAXATION
Pakistan’s property market has seen a dramatic shift over the last decade, absorbing many of the country’s economic shocks. The new administration has adopted new taxation policies for immovable properties in the form of Budget 2019-20 in order to stimulate property investment and eliminate anomalies impeding the growth of the property market. Here are a few of its most noteworthy features:
- Immovable property now has a 1% withholding tax rate instead of the previous 2%.
- No matter how much a piece of real estate is worth, withholding tax must be collected.
- Property sales that are held for up to five years might be subject to withholding tax (WHT).
- Non-filers would no longer be restricted from purchasing properties with a market worth of at least PKR 5 million.