KARACHI, June 26: Property prices have dropped by five to 10 per cent in Karachi after the formation of the new government. However, in posh areas prices have either shown a very slight fall or remained pegged to the pre-election level.

Estate agents and investors were expecting a jump of 10-25 per cent in property prices after the formation of a stable government comprising the Pakistan People’s Party and Muttahida Qaumi Movement. But so far the political situation is uncertain due to row over the judges issue coupled with unsatisfactory economic situation.

Even the PPP-MQM alliance in the Sindh government has failed to inject any renewed vigor among the local investors, who have been busy cashing opportunities in the booming Dubai and UAE markets.

However, falling property rates would have been considered best to buy units at lower rates but bleak future political scenario is casting doubts among the investors for taking risk in an unpredictable real estate market.

Some estate agents said that the property market had been suffering from a lackluster trend for the last two years, especially after the imposition of capital value tax of two per cent in 2007 coupled with political situation after October 18 incident in Karachi, imposition of emergency in November and Benazir Bhutto’s assassination in December, 2007.

President United Defense Clifton Estate Agents Association Raja Mazhar also confirmed to Dawn that the property prices after the election had fallen by five to 10 per cent since investors have been on the sidelines owing to the political unrest, and imposition of CVT.

“The buying activity has been at the bottom in the posh areas and only four to six files are being transferred at the DHA office these days,” he said adding that investors are now busy in estate business in Dubai, UAE and even in Malaysia.

He recalled that the people had made massive investments in booming real estate business in the DHA and other areas following huge influx of home remittances during the period 2001-2005, which had pushed the property rates up by four to six times.

He said that investors and dealers were expecting some relief in the budget like abolishment of CVT but the government had further introduced tax on developers and builders.

He added that the prices of property will further drop in case the political situation remains unstable.

An estate agent in Gulistan-e-Jauhar said that the prices of plots and houses in developed blocks had been unchanged for many months but in un-developed areas there has been a decline of Rs300,000-500,000 in blocks 7, 11, 12, 4 and 5. He said there had been hardly any sizable sale and purchase activity after the elections. He added that only genuine sale and purchase was going on but on a very limited scale.

However, despite slowdown in sale and purchase activity, people and investors have taken huge loans for house building as well as for renovation to increase their property value and fetch a good price.

According to State Bank’s figures, there has been an increase of Rs11 billion in loans for house building in the last 10 months to Rs66 billion till April 2008 from Rs54 billion in June 2007.

Owner of Nazimabad Estate Mohammad Najib was of the view that prices of properties in both developed and undeveloped areas had fallen by at least 20 per cent after the elections.

He said local investors had been holding their investment due to political turmoil. It seems that the property business is likely to remain at the low ebb for the next six months until the political situation improves.