Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


Property prices, rents on the rise

March 23, 2013

- File Photo
- File Photo

KARACHI: Property value and rents rose sharply during the last five years in the PPP-led coalition government.

After staying on the sidelines for years, estate agents are now active in the market, besides genuine buyers and sellers, striking deals at a regular pace.

The price-hike in certain areas of Karachi is being attributed to rising demand of housing in certain localities which are considered safe, and where people from violence-prone areas have shifted. In the upper middle class, there has been a strong preference for lodging in Defence and Clifton. Property demand in posh localities was boosted by the elite migrating from other parts of the country as well as from the interior of Sindh.

People, who cannot afford to own a house, were hit hard as hike in rents was steeper.

Property dealers pointed towards another trend as people have now started purchasing old houses and converting them to multiple units. They often construct several portions (ground, first and second floor) as independent units and sell them at premium. This trend is not confined to any particular area.

Stakeholders see home remittances as key driver in the property market.

Home remittances worth $56.73 billion arrived in the country between 2007-2008 and July-February 2012-2013 which found its way to property, shares and gold.

A 100 per cent hike during the last five years in the cost of construction material and labour charges also pushed up property prices.

Mohammad Shafi Jakvani, CEO, CITI Associates (Clifton), said that a drastic change was witnessed in prices of open plots, apartments and bungalows between March 2008 and March 2013, especially in Defence and Clifton.

The minimum increase in the price is around 50pc and the maximum is around 150pc in almost all categories: open plots, constructed properties/bungalows and apartments.

In the commercial sector, he said this percentage is a little lower because of low demand for offices and showrooms, but overall bullish trend was being witnessed in the real estate sector, particularly in DHA and Clifton.

In March 2008, the price of a 500 square yards open plot in Phase VIII, was Rs5 million and now the same plot currently costs Rs12.5m.

Strangely, the 500 sq yds open plot in Phase-VIII (D-Cutting) is now available at Rs18-20m as compared to Rs8m in 2008.

The price of a 500 sq yds new double storey bungalow in 2008 was around Rs25m as compared to its current rate of Rs45m.

Almost same percentages apply to 300 and 1,000 sq yds bungalows. It could differ in location and size of a plot or a bungalow in a particular area of Defence.

A newly-built double storey bungalow (1,000 sq yds) now costs around Rs90m as compared to Rs60m in 2008 while quality construction exceeds its price to over Rs90m, he said.

This same ratio, he said, is also applicable to apartments in DHA and Clifton.

In DHA phase VI, a two-bedroom (900 sq ft) flat price in 2008 was at Rs2m as compared to its current rate of Rs4.5m.

As spacious luxury apartments are being preferred in Clifton, the price of a three-bedroom apartment hovers between Rs20m and Rs22m as compared to their price of Rs8m to Rs9m five years back.

In Clifton, Civil Lines, Frere Town and Bath Island, apartment prices have increased at a high percentage.

Normally in Clifton and DHA, rental returns are based on four to six per cent per annum, in residential property. It depends on the size of unit.

The smaller units have high rental returns compared to large units. The two-bedroom rent in 2008 Rs12,000 as compared to the current rate of Rs20,000-25,000, while three bedrooms     apartment rent stood at Rs25,000-30,000 in 2008 as compared to its current rate of Rs50,000-70,000.

For 500 yards bungalow, rent was Rs50,000-80,000 and it ranges between Rs100,000 and Rs150,000.

Shafi said that prices had risen mainly during the last 30 months as property prices in 2008, 2009 and till mid-2010 remained stable. The trend changed in late 2010, and it witnessed a major jump in 2011 and 2012.

He said that if we take the lowest price of 2010, increasing percentages would be on the higher side.

After March 2008, the market took more correction, especially when many investors lost their equity and capital in Dubai and many options were available for sale and there was no buyer in the market.

The price appreciation started at the end of 2010 and it took further boom in 2011 and 2012.

Cash flow and inflow of black money in the economy is easily being consumed in the real estate sector.

There is a huge difference in official or documented price and market value or deal price of a plot. If the price of a plot is Rs25m, the buyer has to show only Rs1m to Rs2m in documents. It means, taxes apply on documented value while the rest of the amount is paid without a receipt.

Khan Zubair Shaheen, owner of Pak Estate, said that people living in Gulistan-i-Jauhar and Gulshan-i-Iqbal are continuously inquiring about bungalows and plots in DHA.

He was of the view that DHA and Clifton did not witness any big residential or apartment project in the last 20 years except for Creek Vista.

Mohammad Najeeb, the owner of Nazimabad Estate at North Nazimabad, said that 200, 233, 400 and 1,000 sq yds double storey houses in different areas of North Nazimabad now cost Rs10m, Rs13.5m-Rs14m, Rs17.5-22.5m and Rs32.5-44.5m as compared to Rs6 to 6.5m, Rs10-12.5m, Rs12.5-17.5m and Rs20-25m respectively in March 2008.

The rent for one portion of a 233 sq yds house now ranges between Rs20,000 and Rs30,000 as compared to Rs12,000 and Rs15,000 in 2008, while one portion of a 400 sq yds house is available at Rs25,000 to Rs40,000 depending on location and condition of the house as compared to Rs15,000-20,000 in 2008, he said, adding the rent for one portion of 600 sq yds costs Rs30,000 to Rs60,000 as compared to Rs20,000 to Rs30,000. Najeeb said that the rent of a two-bedroom flat hovers between Rs12,000 and Rs15,000 as compared to Rs7,000 and Rs8,000 in 2008 while the rent of a three-bedroom flat is tagged at Rs25,000 as compared to Rs15,000 or Rs16,000 five years back.

Abdul Wahab, owner of Johar Associates in Gulistan-i-Jauhar, said that in Block 14, a 400 sq yds plot costs over Rs9m now as compared to Rs6 to 7m in 2008.

Similarly, the price of a double storey 400 sq yds bungalow ranges between Rs17.5m and Rs20m as compared to Rs10m and Rs12.5m in 2008.

In Block 15 of Gulistan-i-Jauhar, a 240 sq yds plot is available at Rs9m as compared to Rs6m to Rs6.5m in 2008 while a double storey new bungalow of 240 sq yds in the same block sells at Rs14m as compared to Rs11-12m in 2008.