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Potential of Pakistani real estate sector unrealized

Mohsan Shaikhani, Chairman of Association of Builders and Developers (ABAD). (AN photo)
KARACHI: Pakistan is facing a shortage of around 12 million housing units, making the country a potentially attractive destination for foreign investment.
But instead of investment inflows, Pakistan is facing a flight of capital, mostly to Gulf Cooperation Council (GCC) countries, particularly the UAE.
“Around 600 Pakistani companies, including 100 developers, are active in the real estate sector in the Middle East,” Mohsan Shaikhani, chairman of the Association of Builders and Developers (ABAD), told Arab News.
“The rental income on properties is 7-10 percent per annum in the UAE. Owners and companies get financing from banks at 3.5 percent at 50 percent of the equity.”
Builders and developers in Pakistan complain that they get financing at very high rates of 12-14 percent. “Rental income in Pakistan is a mere 4-5 percent,” Shaikhani said.
People in the real estate business say inconsistency in policies is discouraging investment inflows.
The Sindh Building Control Authority (SBCA) in May banned construction of high-rise buildings, but projects under construction or already approved will not be affected.
And due to stability brought about by successful operations against terrorists, property prices have risen.
“Between 2014 and 2017 prices doubled, but the cost of doing business has also increased by 100 percent in the last four years,” Shaikhani said.
Another factor contributing to the rise in house prices is purchases by overseas Pakistanis who were forced by circumstances post-9/11 to have at least one house in their country of origin.
Shaikhani said the potential of the Pakistani real estate sector is around $180 billion. Amid a growing population, the country needs around 700,000 extra housing units per year, but ABAD sees no plans for low-cost housing prospects.

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