Pakistan’s Real Estate Sector faces a grim outlook, with recovery not anticipated until after 2030. According to industry insiders, this downturn can be attributed to unsupportive government policies and a lack of innovation within the sector. A real estate developer disclosed to Insight Pakistan that the market has sharply declined over the last two years, with little hope for an early revival.
Factors Contributing in Downfall
The decline in property values has been impacted by several factors; some of them are mentioned as follows;
- Increase in remote work reduced demand for commercial spaces.
- High inflation and KIBOR interest rates maintained by State Bank.
- Lack of policy initiatives converting cash into documented economy.
Impact of Economic Policies
The economic policies implemented by the current administration have not been favorable for the real estate sector. With construction and property activity dwindling from 65% in 2018 to a mere 12% now, the industry faces severe challenges. The increase in inflation, coupled with the depreciation of the rupee, has escalated construction costs significantly, impacting overall market activity.
Decline in Property Values
Properties in regions like Multan DHA have seen a drastic decrease in value, losing around 41% over just two years due to mismanagement and speculative practices. This trend of declining values is consistent across the sector, with substantial financial losses for investors, including overseas Pakistanis.
Market Predictions and Investor Sentiment
The ongoing economic instability has caused a pullback in investments, particularly following the reappointment of the 2022 policymakers. Notably, investments in Multan DHA have plummeted by approximately 50% since January 2022. Conversely, some areas in Lahore and Islamabad have seen an increase in commercial investments despite the nationwide downturn.
The Outlook for Rate Cuts and Inflation
While inflation is nearing the State Bank of Pakistan’s target, the commercial real estate market is unlikely to benefit from potential rate cuts. Investment bankers and analysts predict that the current financial strain on the real estate sector may force the central bank to maintain strict controls rather than stimulating the market with lower rates.
Challenges and Expectations
The commercial real estate sector remains in a precarious position, facing both domestic and global economic pressures. Industry stakeholders urge the government to implement measures that could alleviate the high inflation impact and reevaluate policy decisions to support market recovery. However, with current policies and economic conditions, the sector’s path to recovery appears long and fraught with challenges.
The data and estimates mentioned above were crafted in consultations with different property marketing companies nationwide. If you have different opinion or better suggestions, please comment below.
