How is Political Instability Affecting the Real Estate Sector of Pakistan?
It is a known fact that political instability and a stumbling political environment affect all the sectors and industries of a country. Contrary to this face, a healthy political environment and a stable government can boost the economy. Where political instability affects different businesses and industries, the real estate sector is also prone to its threatening effects.
In a country like Pakistan, which already faces economic crises, unstable political conditions can become a hazard to the real estate, development, and construction sectors, as we are witnessing today. According to a survey conducted by the World Bank, almost 60% to 70% of a country’s stored wealth is in the property sector. Pakistan’s current real estate value is between $300 and $400 Billion which makes 2% of the total GDP, according to the Pakistan Bureau of Statistics (PBS).
The Real Estate sector plays an important role in building the economy and flourishing it further. Therefore, certain steps should be taken for its improvement. A crippled Real Estate sector can influence the economy greatly and result in disasters for the overall economy.
Ever since the change of government in Pakistan in April 2022, the real estate sector has undergone a visible downfall and it is deteriorating over time. The ups and downs in politics are greatly affecting Pakistan’s real estate sector.
This article helps you understand how political instability can affect the real estate sector
Political Instability Induces fear in the Market
It is an undeniable fact that political instability induces fear in the property market. This means that lack of confidence starts to grow amongst investors, end-customers, construction firms, and developers of real estate projects. This is because people are unsure of the future of property due to uncertainty. To put it simply, due to the uncertainty of the market, owners are trying to sell their properties whereas buyers and investors are very careful while purchasing because there is no guarantee whether the prices will stay stable or fall.
Increase in Tax on Property Sector
Different governments have different viewpoints about the real estate sector of a country. Some governments understand that people with high purchasing power are mostly linked to this sector; therefore they classify them as people with financial power that can pay taxes. While other governments try to enable a majority of the population to buy real estate, and for this purpose, they try to keep the taxes minimum
The current government has implemented heavy taxes and introduced new taxes for immovable properties in Pakistan which have led to a noticeable decline in the purchase of a property. Furthermore, an increase in taxes discourages investors from actively investing, hence causing a decline in the growth of the real estate sector.
Priorities of New Governments
A shift in government is also a shift in priorities as we witnessed last year. Some governments prioritize the real estate and development sector as it contributes to the growth of the economy and country. While other governments have other priorities and they more attention to establishing educational and healthcare institutes. When investors and developers are not getting enough funds and benefits from the property, their interest is reduced and the growth of real estate sectors slows down or stops completely at worst.
Disturbance in Supply and Demand
Similar to other industries, the real estate industry also follows a supply and demand principle. The supply of property should be consistent to entertain the investors and customers. When the supply is more than the demand, the prices automatically decrease and owners will face loss and vice versa.
Decreased Property Prices
When the demand for property is low and there is a lot of supply, the value decreases, and market prices automatically go down. In this scenario, the investors and buyers stop searching for opportunities. However, at this stage, many investors can benefit and purchase properties at low prices and wait for the right time to sell and enjoy huge profits.
What to Do in Such Uncertain Conditions?
First of all, you need to understand this situation will not prevail forever, and probably things will get better with time. However, you should stay well aware of current market conditions and not panic. Try to educate yourself with the latest policies of the current government and adjust your decisions accordingly.
- If you are a seller, it is crucial to wait for the right time to sell property. Do not panic, and wait for property prices to get better so that you can sell and earn profits.
- If you are an investor, now is the right time to buy property at cheap rates. But keep in mind that you’ll have to wait for prices to raise to earn maximum benefit.
- If you are an end-user, you can purchase property at a very reasonable rate. But make sure that you have a mind to keep the property, and use it for rental (passive income) income.
Conclusion
It is an undeniable fact that political instability affects the real estate industry to a large extent and induces negative trends in the market. Currently, Pakistan is going through such a situation where the real estate sector is deteriorating, but it won’t last forever. It is crucial to stand your ground and not make a decision that you may regret later. Just keep yourself updated with the latest trends, policies, and prices, and wait for the right time to invest, buy or sell property!
Stay tuned to Manahil Estate for more informative blogs! You can also contact us for authentic and useful advice and adjust your actions accordingly!
