Pakistan Real Estate 2021 – Analysis, Forecast & Investment Options

The real estate industry is one of the major and fastest-growing industries of Pakistan. The country spends over $5 billion in construction works annually. Today, we are going to analyze the Pakistan real estate 2021. We will discuss and predict the performance of the real estate market considering the current situation and possible future events.

Despite the fact that the real estate market is growing drastically in Pakistan, the country still lacks the basic living facilities, i.e house with necessary living facilities. This fact indicates that there’s still a wide room for growth in this sector so that people belonging to every class of income can afford a respectable living for themselves.

Pakistan Real Estate 2021 Investment And Budget 2020-21

The government believed that the budget they present is tax-free and this is a significant achievement amid the worst economic situation of the country. However, the opposition parties criticized the budget on charges that it could not handle the ongoing financial crisis.

The budget was said to be a big economic booster, but the boom will collapse ultimately and the real estate sector will continue to decline.

The freely falling Economy

The budget 2020-21 presented by the PTI government is merely paperwork far away from ground realities. As per IMF, Pakistan’s economy is expected to decline by 1.5 percent in 220-21, while the government’s estimate is up by 2.1 percent. If we consider the government’s inflation target of 6.5, the real GDP decline will be 4.5 percent.

COVID-19 and Locust Attack acted as the final nail in the coffin to Pakistan’s economy. Unstable border conditions are another misery to the economy. The unreliable political and economical situation is further discouraging people to invest in real estate.

The Record High Debt to GDP Ratio

The property market was enjoying a boom in 2003 and 2013. The debt-to-GDP ratio was declining during both boom periods. In 2003, the Debt to GDP ratio was 50 percent, while in 2013, it was 65 percent. However, the debt to GDP ratio is 86 percent at the moment and still rising. So, we don’t have high hopes about the prices of real estate in Pakistan at least in the near future.

Declining buying power; rare end-users in the market

The local Pakistani professionals, businessmen, and expatriates are the potential customers of the real estate market. However, the declining purchasing power of these local Pakistanis is one of the many concerns of the real estate sector. On the other hand, Gulf countries have passed a law asking private companies of reducing the salaries of overseas workers by 40%. By this ratio, the remittances in the year 2020-21 are expected to decrease by around $5 billion, the amount is equivalent to what the government required to build 1 LAC house. In simple words, bad days for our real estate will continue.

Economy & Future Of Real Estate Business In Pakistan

After 75 days of closure due to the COVID-19 lockdown, the production throughout the country resumed in June. The country’s largest auto tire maker, General Tyre and Rubber Company posted the net sales increased by 42% in the first quarter of 2020 as compared to the 3.2 billion of last year for the same time. The growth in sales is also partially due to the government’s efforts to curb the illegal imports of tires.

The cement industry also posted significant growth in sales in the current year as monthly sales hit a record high in October 2020. The mills shipped 5.73 tonnes to consumers. The domestic consumption also increased by 15.8 percent to 4.85 million tonnes from 8.19 million tonnes in October 2019. In terms of Export figures, a rise of 11.58 percent from 784,433 tonnes in October 2019 to 875,266 tonnes in October 2020 was observed. Cement sales reached 19.3 million tonnes in the first quarter which is 19.3 percent more than the last year for the same time.

Talking about another major industry of Pakistan’s economy i.e telecommunications, the government has announced the launch of Spectrum Strategy 2020-2023 to assist commercial telecommunications operators in their network planning investments due to a significant rise in demand. Mobile data traffic in Pakistan rose from 165 percent to 69 petabytes in 2017 to 128 petabytes in 2018. Data use increased from 0.34 Gb/user/month in 2016 to 1.75 Gb/user/month in 2018.

Exports rose by 10.5 percent in October 2020 over the last month, with a rise of US$ 196 million to US$ 2.1 billion. On the other hand, imports decreased by 15 percent to US$3.7 billion in October 2020 by US$647 million compared to the previous month.

Real Estate Contribution To Pakistan’s Economy

Pakistan’s real estate sector is one of the major pillars of Pakistan’s economy. As per World Bank’s Calculation, the size of the country’s real estate assets is between 60 and 70 percent of the country’s total wealth; if we extend this estimation to Pakistan, the average size of our real estate sector is between $300 and $400 billion.

Pakistan’s Real Estate did not perform well due to several financial, economic, and political challenges. But we can hope that things will get better if not immediately then gradually in 2021.

Real estate has slowed since 2017 due to political turmoil and volatility in economic and financial policies. With no incentives for investors and ban imposition on non-filers played a key role in deteriorating the real estate sector.

FBR’s strict regulations on non-filers’ banking transactions further discouraged the investors from investing their into the real estate market in 2018-19. Inability to utilize the development budget that led to a contraction in the building sector is another factor to contribute to the real estate sector’s downfall.

One of the few reasons we believe to see the boom of Pakistan’s real estate market in coming years is CPEC. China Pakistan Economic Corridor is the iconic project between the two countries that has the potential of changing the dynamics of Pakistan’s economy. The significant economic zones of CPEC are yet to be established, however, the benefits of CPEC can be seen with improved power situation and partial completion of the Lahore-Karachi motorway.

Pakistan’s real estate market is quite unpredictable. Therefore, you should be very vigilant and aware of the latest developments and updates related to Pakistan’s real estate market. Being aware of the current real estate conditions will help you make a rational and lucrative decision regarding real estate.

Property prices in Pakistan usually don’t go up even during inflation and uncertainty. This fact can make the investment much more challenging.

The real estate industry is fully capable of persevering through difficult times and that’s something special about this industry. Fair property values are the need of time to make the property affordable for every citizen which will the ultimate success of the country’s real estate market.

What 2021 has for Real Estate?

The pandemic and uncertain political situation have affected the real estate market in 2020. We can hope things can get better and the real estate market will start to attract investors in the years to come

CPEC is an important venture. The economic corridor offers the source of overwhelming foreign investment. The web of roads under the megaproject is connecting Pakistan’s Gwadar port to China’s Xinjiang capital. This corridor will not only facilitate the economic activities of both the countries, but also open new doors of opportunities and growth to Pakistan’s real estate market. As the hub of CPEC activities, the demand for real estate is expected to rise in Gwadar and its outskirts.

2021 And Karachi’s Real Estate

Let’s discuss how Karachi’s real estate market is expected to perform in 2021 and what are our recommendations regarding investment in Karachi’s real estate market.

Karachi, the country’s largest city and the world’s seventh-largest metropolitan, is the major business hub of Pakistan. With ample opportunities for every sector, the Real estate sector still rules the city as the best investment domain.

Area Wise Recommendation For Investment in 2021

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