High prices mar activity in property market: Investors shifting to Dubai
By Aamir Shafaat Khan
KARACHI, May 23: Buying and selling activities in the property market have been laggard for the last two years as market players blame the cause of inactivity in real estate to meteoric rise in prices of plots and bungalows.
Salaries and incomes of people, which might have improved, have not peaked in the same velocity the way the prices of plots and bungalows have surged.
A common man or even a middle class person virtually feel shiver through their spines for thinking to become owner of a house of even 80-120 yards as high prices have virtually shattered their hopes. High prices of real estates have also propelled rentals for houses and apartments and again the ultimate loser is the common man.
Because of huge inflow of home remittances during 2001-2005, investors and speculators injected huge capital in the posh area of DHA, Clifton and other areas, which resulted in quadrupling of prices of plots and bungalows. Prices in many areas, after reaching a saturation level, have either seen a downward correction or remained unchanged during the last one year.
If home remittances would have not arrived at very fast speed after 9/11 incidents the property market scenario, especially the phenomenal price rise triggered by investors’ presence, might have been different today.
Investors have been on the sidelines since April 2005 and the imposition of capital value tax (CVT) last year on property deals has proved disincentive for investors rather than generating too much revenue for the government.
Political uncertainty coupled with judicial crisis since March 9 before October 2007 elections has also alarmed the investors to stay away from the property business.
The government will announce new budget for 2007-08 next month and real estate players have set their eyes over government’s future measures, especially the two per cent CVT and Zakat on property assets.
Real estate players offer a mixed view on the next month’s budget as some say that taxes and duties will remain the same. Others predict that the government may avoid imposing further tax or enhancing current taxes and duties and may remove CVT in order to win support of masses for general election.
They said that they are not much aware of the reports that the government plans to impose Zakat on property as it is a very typical subject involving religion.
President Clifton Defense Real Estate Association (CDREA) Mohammad Arif Malik said that the government was likely to remove the CVT as it has been receiving a poor feedback from the investors. “Hopefully, there will be no new tax in the budget as the people are already paying CVT and stamp duty on property deals,” he said.
Investors have shifted their focus towards Dubai real estate market rather than the Karachi market, Malik said.
Because of investors’ least interest, there has been only 15-20 property document transfers these days in the DHA office as compared to 70-80 in normal days, he said adding that prices of plots and bungalows, after reaching a peak level, have lost their value by 30 per cent in the last one year.
Owner of Pak Estate in Clifton Khan Zubair Shaheen said that the government will not increase the CVT rate but it may either keep it or remove it in the wake of general election.
“Market now witnesses only genuine deals between sellers and buyers,” he said adding that speculators have been away from the posh area since April 2005. In the last one year, there have been only 20-25 per cent buying and selling activities in the area. Currently, only 12-15 property transfers is being carried out daily at the DHA office in which most of the deals are among genuine buyers and sellers, he said.
Besides, the CVT imposition has also caused jitters among investors, who wish to stay out of the tax net.
Hardly 20 per cent of properties in the DHA are owned by old armed forces men as majority of the old allottees have sold their property to the civilians.
Abdul Wahab of Johar Associates in Gulistan-e-Johar said that the government will keep the CVT rate intact and it will not be reduced. “The government should avoid increasing the CVT in this budget as the market has seen its repercussions in shying investors away.
The boiling property market of two years back has now been in cold storage. Plots and bungalow prices had plunged by 10-15 per cent in area in the last six to eight months. “Only genuine deals between buyers and sellers are taking place and investors are not active,” he said.
