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Investing in real estate: how to leverage the market situation?

real estate investment in Pakistan

Since Pakistan’s economy has plunged into a quagmire of severe recession, rampant inflation & impending sovereign default, there is murky possibility of economic revival anytime sooner. Despite the volume of investments in all sectors of economy including the real estate shrinking to an all time low, there are scores of opportunities for smart investors who can take some risk for potentially higher returns.

If you recall the state of real estate markets from 2020 till early 2022, hordes of money was pouring into this sector from native investors as well as overseas Pakistanis which created artificial demand resulting in prices going double or even triple within a time span of 2 years. The spree is long gone and things are getting bad to worse with each passing day. However, this is also the best time to purchase “certain properties”.

The basic principle of economics i.e. “Supply & Demand” is also at play in the current scenario in that depreciation of currency coupled with all-time high inflation & interest rates tend to slow down economic activities and discourage investments. Therefore, low demand has pulled down property prices, especially land prices, across the Country.

In this article, we have going to suggest some real estate investment opportunities which can possibly render good return despite current economic situation.

Currency vs Asset

As the PKR value is consistently going down over the past one year, your are losing value on your money. The money in your current account will continue to lose value unless you convert it into some asset. We have seen prices of certain assets like Cars going up continuously because rupee is losing its value. Similarly, other valuable assets like Gold & Forex are gaining while the rupee goes down.

When it comes to real estate, its prices are either down or stagnant across the Country due to low investment volume. You have the opportunity to convert your money into a valuable property as it will adjust itself according to rupee value soon after the market gains some confidence after the political stability.

Overseas Pakistanis can now take good advantage of buying properties at much lower cost than they could a year ago due to rupee losing significant value. The rupee has lost about 35% value in the last one year, hence Overseas Pakistanis can take double advantage of this situation and buy properties at lower prices + lower cost.

File vs Plot

If you are a real estate investor, you might already know the difference between a file and a plot. Simple definition of a file is that it is a property that is on paper but doesn’t exist on ground, whereas a plot has physical location. Normally, investors use files for regular trading because a file is quite cheap & it tends to gain much value after it becomes a plot.

If you take a quick survey of current market situation, you will understand that property files have lost much value over the past one year, whereas plots have lost little or no value.

Simple reason behind this difference is that files are purchased either for trading or long term investment, and usually this property type is heavily dependent of investors. Once investors are gone, files tend to lose value. On the other hand, plots are purchased for investment as well as home construction. Therefore, this property type has genuine demand which never ceases due to millions of Pakistanis living in rented homes who save money to buy or build their own home.

We recommend buying physical plots in popular schemes like CDA Sectors, DHA, Bahria Town, Multi Gardens, Gulberg, Top City-1, Faisal Town & similar projects where plots have lost about 10% to 25% value over the past one year, hence you can save good money & such properties to prone to appreciate significantly once investment activity resumes.

If you have lower budget, you may consider schemes like Capital Smart City, Airport Green Gardens, AWT, ECHS, PECHS, Faisal Hills, Faisal Margalla City & similar moderate projects where physical plots are available at affordable rates.

Plot vs Built-Up Property

While plot prices have gone down, construction costs have gone up neutralizing the overall impact on built-up properties. Therefore, there is hardly any impact of bad economy on built-up properties, specially those which are ready to move. As new constructions are getting more expensive, older built-up properties are good picks for investment nowadays.

Built-up properties have genuine demand, so you should consider buying slightly old houses (one or two years) or apartments in well-established housing schemes like Bahria Town & DHA, where prices are prone to escalate quicker than other smaller projects. Value of plot plus high construction costs will add to your return in this property type, while you also avert the risk of loss due to genuine demand for such properties.

You may also consider buying apartments in an under construction building which are likely to be ready within a year. Such properties usually cost you about 20% to 30% lower than ready to move apartments.

People with low savings will normally opt for new projects which take 3 to 4 years for completion while price is higher. On the other hand, people with genuine need will normally consider ready to move apartments. Therefore, under construction good properties will usually cost you lower & you can gain good value once the property is ready to move.

Buy More of the Same

This strategy is normally used to minimize losses on files, but it is quite effective when markets are down. If you are an investor & the files you purchased earlier have lost value, you can simply buy some more files of same property at minimum rates in a bid to reduce your average purchase value. 

For example, a file you purchased earlier at 10 lacs is now selling at 5 lacs in the market, you can simply buy 5 more files at current market rates, so your total cost for 6 files will be 35 lacs. Your average cost per file will be around 6 lacs, and you will have high chances to recover your full amount in a short time because files normally fluctuate that much regularly.

If you have higher budgets, you can buy even more files to minimize your average cost. This strategy works best with commercial files due to lower availability and higher fluctuations, but it also works in other property types.

You can use this strategy in any residential & commercial files of good housing schemes like New Metro City, Park View City, Faisal Hills, Faisal Town Phase 2, Capital Smart City, Rudn Enclave & Similar projects where you have incurred some loss due to market situation.

Final Word

Whatever be the economic situation in Pakistan, this too shall pass and things will be back to normal. If you sit back & follow the wait & watch strategy, you normally remain watching and smart investors will take advantage of the situation using their wisdom & market reading.

With all commodities going high, properties too shall go high once the uncertainty is over. Overseas Pakistanis can save good money by investing in this situation until the property adjusts its value according to real worth of currency, so this is the right time to buy properties rather than throwing away your existing properties in order to get rid of frustration.

Pakistan is a country of 220+ million people with shortage of more than 10 million houses with demand increasing each year. Major part of one’s lifetime savings is usually spent on purchasing a property in Pakistan, therefore the prospects of real estate industry are always positive.

If you want to discuss about your investment options, feel free to drop us an email at marketing@manahilestate.com with your query & contact number and we will follow back with suitable solutions.

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