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By Farhan Zaheer

A family rides a camel past the construction of an office building and mall complex on Clifton beach in Karachi,
Pakistan. PHOTO: REUTERS

KARACHI: A slowdown in Pakistan’s property market has not deterred overseas loyalists from
pouring cash back home, but their taste preference has undergone a massive change.

There is no denying that real estate has proved to be one of the safest, most profitable avenues
for investment in recent times. With the law and order situation improving significantly in the
last few years, developers have now once again picked up the shovel to dig deeper in Pakistan’s
most profitable sector.

But the change in recent times has been the buyers’ preference for a smaller amount of land.

“Overseas Pakistanis who have always been interested in buying residential plots in trustworthy
housing schemes are now also taking an interest in apartments, especially in big cities,”
Association of Builders and Developers of Pakistan (ABAD) Chairman Mohsin Sheikhani told The
Express Tribune in an interview.

Before 2014, the percentage of overseas buyers in a high-rise project in Karachi was not more
than 5%-7%, However, this percentage is now easily over 25%, and sometimes reaches over
30%, said Sheikhani, who believes the single most important factor that pulls overseas investors
towards real estate in Pakistan, especially Karachi, is the marked improvement in security
situation since 2014.

With residential plots’ registering at least a 25% increase in prices year-on-year, overseas
Pakistanis are finding it easier and cheaper to find apartments – a ready, set and go option for
people moving back home.

While the new rates of capital gains tax held back the growth in real estate prices, a recovery
was seen in the first half of calendar year 2017.

In addition, growing political challenges for Muslims after Donald Trump became president of the
US and Britain’s exit from the European Union (EU) have also contributed in convincing many
overseas Pakistanis to make an early decision of having a second home in the country, he said.

Real estate dealers say most overseas investors still prefer to buy land in leading housing schemes
like Defence Housing Authority (DHA) and Bahria Town due to the secure nature of the investment.
But the percentage of those who buy apartments has increased, and faster, in recent years.

Karachi, which attracts most investments in high-rise buildings, leads the list with over 300 ongoing
projects while Islamabad and Lahore have over 150 high-rise buildings that are under construction,
according to ABAD estimates.

Hurdles to investment, issues for high-rise buildings

However, currently, a Supreme Court verdict prohibits the approval of any new high-rise project in
Karachi due to the shortage of water in the city. Property dealers have been criticising the stance
of Karachi Water and Sewage Board (KWSB) that moved court to slap a ban on new high-rise
projects due to its inability to provide enough connections.

Earlier, the federal government had slapped a ban on new gas connections to high-rise buildings in
2011. The ban was eventually lifted in 2016 after the country started importing LNG, but the situation
itself was enough to damage investor confidence.

“At present, over 300 projects in Karachi are facing a delay due to the Supreme Court’s ban on new
water connections,” said Sheikhani. “This is discouraging builders as well as investors.”

The government needs to provide basic utilities because builders and developers can pay taxes but
they cannot play the role of the government. Any ban on the use of basic utilities, whether it is
water or gas, is tantamount to supporting illegal housing, which is already becoming a menace in
big cities, he added.

According to a World Bank study of 2009, there was a shortage of 7.5 million housing units in
Pakistan, which increases by 0.35 million housing units every year. If the World Bank’s estimates
are to be believed, there must be a housing shortage of at least 10.3 million units in 2017.

“Pakistani institutions are not planning for future needs. With a growing backlog of houses due to
low supplies, we are heading towards a disaster,” Sheikhani warned.

Source:Published in The Express Tribune, September 20th, 2017.