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Pakistan Real Estate Report Q4 2011
Business Monitor International, Sep 2011, Pages: 41
Despite having a vast and rapidly expanding population and noticeably improving infrastructure, demand for commercial real estate continues to decline. One development which may help in the longer term is a drop in interest rates in August 2011. High interest rates (from 14% earlier in 2011) coupled with slowing economic growth had weighed heavily on the industry, and this change may be a small boon for the sector, even though growth continues to slow.
The biggest driver for real estate development has been the government’s target to increase the amount of housing available to its extensive population. Since 2008, it claims to have completed 5,814 development schemes under the guise of its Peoples Works Program (PWP), which have cost around PKR20.4bn. Residential developments include work in Karachi’s Defence Housing Authority (DHA) Phase VIII area and the latest projects by the country’s Capital Development Authority (CDA).
Local zoning policy is lacking in places but development authorities are trying to get plans agreed to begin to meet the needs of their local communities. Colliers reports that the Lahore Development Authority (LDA) and the Government of Punjab both have plans under way, including infrastructure acts and public-private initiatives for the development of roads and parking centres, among the many other aspects of urban planning.
Key Opportunities In The Real Estate Market:
- Plenty of residential, mixed-use development projects are under way, including the eco-friendly Park Enclave complex in Islamabad, under construction by the CDA. The trend for environmentally conscious development seems to stem not from consumer demand but from the fact that it opens access to land in zones that would not normally be available for development.
- Another new project is for 10 hotels by Cristal Group Holdings, a UAE-based hotel operator, under way in July 2011. According to the Express Tribune, the properties will range from budget to luxury hotels and are part of a 25-property expansion. Cristal signed a memorandum of understanding for a joint venture with Pakistani developer Rufi Group.
- Lahore’s local development authority is ripping down developments that were built illegally and this has produced its own demand for local retail space. Key Risks To The Real Estate Market:
- Stalling projects have begun to surface. A joint venture between Dubai-based developer Emaar Properties and Giga Karachi began the development of the Crescent Bay complex. However, only two towers have been partially constructed and, in July 2011, Karachi’s Defence Housing Authority took over the project (which is on its land).
- Rents and yields remain impossible to predict, given the precarious security situation in the country.
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.
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