Overseas Pakistanis buying property in droves, but there’s a preference change

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. Overseas Pakistanis send $16 billion in remittances, up 5.25% “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.