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How will Coronavirus Pandemic Impact Real Estate Sector in Pakistan?

Corona Impact on Real Estate

In the wake of rising number of cases of “Corona Virus” particularly in Pakistan, and the potential economic meltdown over the next few weeks and months, it is quite pertinent to discuss the impact of COVID-19 Pandemic on the real estate sector of Pakistan.

Since health is the primary concern of an individual, everything else will have secondary value if the Coronavirus Pandemic gets out of control. Businesses can potentially suffer a lot, as economic activities can come to a halt due to persistent life threat and the authorities may resort to using all means to keep people locked in their homes.

We are already watching the situation getting worse in some countries of Europe, where emergency measures are being taken to flatten the curve in order to mitigate the effects of novel corona virus spread. Similar steps are being taken in the USA because there is no other prevention to the spread. The governments are forcing people to stay at home and shutting down all businesses temporarily. Who is going to think about business and investments, when they are faced with a deadly pandemic?

Just recently, a series of drastic measures have been taken by Sindh, KPK and Punjab Governments to curb the widespread outbreak of the Pandemic. With the cities being partially locked down, economic activities have slowed down across the Country. The magnitude of the spread is yet to be known as the number of cases are increasing day by day, which is causing more panic in the society. If this situation continues or further deteriorates, all business activities may be completely stopped.

This developing situation has created an air of uncertainty which is quite damaging for investment environment in the Country. Stock market has already started reflecting downward trend as panicked investors are pulling out of the stocks. Similar crisis can happen in real estate sector if the situation doesn’t show signs of improvement soon. 

Real Estate in Pakistan has had a very difficult time after the change of regime in 2018 due to a number of policy issues and lack of confidence. This huge market of dealers, investors, marketers, builders and developers has hardly managed to survive from recession in the past 2 years, mainly due to massive investments by Overseas Pakistanis. But the issue is much bigger this time that can potentially cause a serious crisis in the real estate markets across all big cities including Islamabad, Rawalpindi, Lahore, Multan, Peshawar and Karachi.

 

Following is the chart showing COVID-19 spread across Pakistan:

Corona Virus Spread in Pakistan

As we can see on the chart above, the red color shows the areas where confirmed cases are reported, whereas the blue color shows the areas where suspected cases have been reported. The graph is growing bigger by the day which is an alarming situation for Pakistan.

As for now, there is little impact of Corona Pandemic on the behaviors of real estate buyers and sellers. Temporary travel ban by certain countries has caused some issue for Overseas buyers or sellers, and some property deals have suffered but overall impact is still not very significant. Local investors are still engaged in their routine work, but they are also observing the evolving situation closely and cautiously. 

Some societies like DHA Lahore and DHA Rawalpindi have already closed their offices and facilities for few weeks as a precautionary measure.

DHA Lahore Corona Alert

Lahore Development Authority has closed its One Window Operation for 10 days in order to avoid public dealings. LDA will not receive any new applications, and citizens can get answers to their queries on LDA Website.

LDA One Window Operation News

Bahria Town Karachi has closed all of its places of public gathering including Eiffel Tower, Zoo, Gyms, Parks, and Sports Grounds etc, till 23rd of March, 2020 until further notice. Moreover, all scheduled events are to be cancelled, and visitors are not allowed after 5:00 PM.

Bahria Town Karachi Corona Alert

This is just the beginning of such restrictions. We fear similar or more serious steps by other societies in the next few days if situation doesn’t improve. That would mean all property transactions would practically stop for unspecified period until the situation gets better.

If global travel bans prolong, overseas Pakistanis would not be able to come and invest in real estate during this Eid-ul-Fitr. This will also cause a major shock to real estate sector because it is largely supported by overseas investments.

As a general rule, uncertainty deters investment. If everything comes to a halt even for a short period, people would rather disinvest and keep cash in hand for the unforeseen circumstances. Property prices can potentially drop by as much as 10% to 20% due to inactivity of markets. Those who sell during this period are likely to suffer losses, and those who buy would certainly benefit from their purchases. 

Since Coronavirus Spread is everywhere, property prices in all cities would be affected by it. Biggest markets like Karachi, Islamabad and Lahore could be severely hit because their major share of investments come from expat Pakistanis.

The actual span of the expected crisis is much bigger – real estate is just a small part of it. Financial institutions, travel industry, hotels industry, construction industry, export industries, and local manufacturers etc, would all be suffering heavily during the crisis situation.

Governments in Europe and America have released billions of dollars as support funds to shore up their economies during this crisis, but Pakistan cannot support its industries and businesses without external assistance. We should, therefore, be prepared for a temporary period of financial distress in Pakistan during the mid 2020.

We can just hope that the world would be able to control COVID-19 Pandemic soon. USA is hoping to tackle this issue by July or August 2020, while the vaccine may take more than a year to be out in the market. Even if Pakistan manages to control the virus spread, our economic situation would not improve until the pandemic is controlled globally and normal travel and trade activities resume among countries. 

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