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Pakistan Real Estate Report Q3 2011
Business Monitor International, June 2011, Pages: 58
Business Monitor International's Pakistan Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Pakistan's Real Estate industry.
Pakistan’s commercial real estate sector is going through its third consecutive tough year as demand for space continues to fall. Weak economic growth coupled with high inflation and measures to stem the increasing inflation weigh heavily on the industry.
A major influence in the marketplace currently is the intervention of the government in low-cost residential property. The government is determined to provide housing access to the entire population – a tall order when 40% are below the poverty line. The Capital Development Authority (CDA) has launched numerous projects to build residential and multi-use properties. The Pakistan Housing Authority, a subsidiary of Ministry of Housing and Works, constructs affordable apartments and says it is the first time that the government has itself got involved the actual construction of affordable housing. Both agencies have attracted some negative press for focusing on projects targeted at government employees and politicians, rather than those in poverty.
It is outside the government sector and its residential projects influence that demand has really dried up. Many small businesses, unable to afford the rent and the other costs that come with commercial premises, have been forced to use residential premises, despite the risk of penalties and fines. These once-tenants have essentially removed themselves from the commercial real estate market and we have seen big falls in rents at the minimum end because of this.
Some of the key opportunities currently in the real estate market are:
- Despite the downturn, new construction projects are underway and there is scope for developments which offer the population more safety and security in volatile country.
- The development of multi-use projects has just started and looks likely to be the way of both helping the government meets its target of housing-for-all and developing better-quality commercial space. The country has its first mega-development project, The Centaurus in Islamabad, which as of May 2011 had the basement, retail shopping mall space and 20 floors of residential apartments completed.
Some key risks to the current real estate market are:
- Rents have and are falling but yields have not moved much at all, indicating that property prices have fallen by nearly as much as rents.
- The country’s economic imbalance between growth and inflation pose an ongoing threat to the sector.
- While Pakistan’s real estate fortunes are somewhat linked to the success or failure of companies in Dubai, the country is at the mercy of the Middle East.
- The highest risk to the country at the moment comes from large-scale military or terrorist action and/or a similar extent of devastation caused by nature.
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