Real estate prices moving up

Published February 20, 2002

LAHORE, Feb 19: The prices of real estate in the provincial capital have begun moving up in the recent months after a decade-long slump in the property business.

Real estate dealers insist that investors and “genuine buyers” (people who plan to build a house for themselves in the immediate future) have started investing in property for better and quicker returns.

“Investment in property is catching up fast,” the dealers told Dawn here on Tuesday. Though they do not expect a big boom in the short-term, they feel that it will boost their business in the long run.

They attribute the higher land rates to such factors as low returns on bank savings and bearish stock markets. “Investors feel that they can earn better returns by putting their money in property rather than keeping it with banks or investing in shares (that also involve a greater degree of risk),” they say.

Moreover, the expatriate Pakistanis have started sending their remittances through the banking channels due to the curbs imposed by the United States and the Gulf states on hundi and hawala transactions after Sept 11, add the dealers.

“The remittances sent by the expats through banks have increased liquidity in the market. The money has to be invested in some secure, profitable business. Pakistan’s improved image after the Sept 11 events as well as restructuring of its (foreign) debt and inflow of grants and aid (which have bolstered forex reserves to over $5 billion) has raised hopes of improvement in the economy and start of industrial activity. The situation has also contributed to a great extent to the increased investments in the property,” the dealers say.

The property rates in the city slumped in the early 1990s when thousands of people lost about Rs13 billion in the notorious cooperatives scam involving around 102 societies which had invested heavily in the real estate, artificially inflating its rates. The exposition of the scandal caused the real estate prices to tumble, resulting in heavy losses to the investors.

“The situation was complicated due to the economic slowdown in the country that retarded GDP growth. The businessmen were reluctant to establish new industrial units as a consequence of the poor economic conditions. The investors pulled out their money from the property after suffering huge losses and shifted to the stock markets boosted by the government’s deregulation and privatization policies in the early 1990s,” assert the dealers. “The construction activity also came to a grinding halt as result of the economic slowdown.” All these factors conspired to make the real estate investment far less tempting and attractive than it was thought to be in the 1980s, the dealers say.

“The final shock to the business came when the military regime began nabbing the businessmen towards the end of 1999 in order to recover bank loans from them,” the dealers say.

“However, that situation has started to change now. Apart from the investors coming back into the property business, the genuine buyers are also purchasing land, particularly in the well-planned housing schemes. You can see that the construction activity has picked up,” they claim.

The property rates at housing schemes like Wapda Colony and Defence Housing Authority as well as their adjoining schemes have shot up substantially despite the fact that they are situated far from the downtown. “The main reason for this price escalation is the increased construction activity going on there in addition to the availability of public transport. Furthermore, the people are expecting the government to shortly commence work on the proposed Ring Road project that will cut the travelling time from the downtown,” the dealers say.

They insist that the investors are hoping to make quick bucks by putting their money in the housing societies after a long spell of slump in the business. They (investors) are confident that the liquidity position has improved to the level where most of them would want to have their own house. After all, there’s a big gap between demand and supply of housing in the city due to its fast population growth, the dealers say.

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