LAHORE, Feb 10: The real estate prices in the provincial capital are said to be showing signs of recovery after hitting the lowest levels in the last five years.

“The market is stabilising, and showing signs of improvement,” says real estate developer Sahir Chaudhry. “The advent of investors from the Middle East in real estate in Lahore, and the expectations of improvement in the bilateral relations between Pakistan and India are driving up the market once again,” he adds.

However, he warns, “it would be unwise to expect a radical change in the market or an abrupt upward movement in the real estate prices in the short-term.” He feels that it will take at least one more month to forecast on the future trends in the real estate market.

The real estate prices began to surge in the aftermath of terrorist attacks on American soil in September 2001 as billions of dollars were pumped into the country's economy in the shape of foreign aid, grants and workers’ remittances, improving macroeconomic fundamentals.

The property prices reached their peak towards the end of 2004 and beginning of 2005 as speculators invested billions in real estate to escalate the market to its historic highs. Present looked good and future bright as investors, small and big, made huge and quick returns on their investments.

“People bought and sold even those properties which didn’t exist at all,” says Saleem-Ul-Haq Khan, a lawyer and property consultant. He says: “There was so much activity, and a lot of it was generated by genuine buyers rather than by speculators.”

The prices of residential plots in the reputed housing schemes multiplied like anything. The rates of files issued by some start-up housing colonies even without infrastructure (some issued the files even without acquiring the land) in the suburbs of the city as well as by DHA for its new phases also jacked up prices up to 300 per cent.

The property balloon, nevertheless, burst in the middle of 2005. Big investors and industrialists pulled out their investments. A kind of panic spread and the property prices dipped 40-50 per cent from their peak levels. Since then, the real estate market in the city has been extremely slow and property transactions are far and few. There still are few buyers or sellers in the market. Many real estate consultants hold that the market will take a couple of years to stabilise.

Sahir says the bubble had to burst because over expansion of properties and absence of any checks on speculative investments. But, he also says, there is nothing to be worried about”. “The market has to gradually stabilise and go up. We are still cheaper in the region as compared to India and that is a reason why investors from the Gulf are investing in our real estate market,” he said.

Other factors, including relations with New Delhi, are also improving. “I hope the market will pick up, though gradually, some months from now,” he added.