The real estate sector is normally considered to be the best place to park black money. It was also the same in the real estate sector in Pakistan a few years ago. But due to the implementation of new real estate laws in the 2016–2017 budget, things started getting changed and improved. New laws increased the taxes on the transactions of property; the rates of property were also revised; and the flow of black money into the real estate sector was blocked.
Pakistan’s real estate market has turned out to be a big contribution to the socioeconomic development of Pakistan. In fact, the State Bank of Pakistan reported that “the combined share of housing and construction in the country’s GDP has been consistently higher than 9 percent” at the beginning of this year. But currently, the real estate sector is facing a crash. This blog will outline the 5 reasons for property prices crash in Pakistan.
1. Action Against Black Money
One of the main causes of the most recent price decline is the implementation of strict accounting. The government has a “zero-tolerance” policy for black money. And the people who bought their property with black money are now being asked about their source of income.
As the buyers who used to buy real estate through black money are now afraid of being caught, there is a low investment rate in the real estate sector. This is one of the reasons why property prices crashed in Pakistan.
2. High-Interest Rate
Interest rates directly affect property prices, and there is an inverse relationship between interest rates and property prices. The decrease in interest rates increases property prices and vice versa. This is because when interest rates increase, banks start giving more profit on fixed deposits. So people start selling properties and depositing their money in banks to earn more profit on their fixed deposits. But when interest rates start decreasing, banks stop giving people profits on their fixed deposits. So, people start buying a property that automatically hikes the price due to high demand. Therefore, the second reason for property prices to crash in Pakistan is high-interest rates.
3. illegal Housing Schemes
The crackdown by NAB against illegal housing societies is one of the causes of the property price crash in Pakistan. Because of real estate scams, a lot of Pakistanis have lost their life savings. But things have become much better now that the government is demolishing the illegal constructions. Additionally, the NAB has shut down a number of illegal housing schemes. According to research by the NAB, almost 6,000 illegal housing schemes or societies exist in Pakistan. This factor has also played a major role in the reduced rate of investment in the real estate sector because people are scared of investing and buying properties because of illegal housing schemes. So, ultimately, property prices have crashed in Pakistan. Town One is a very authentic and legal housing society.
4. Non-Filer Property Buying Restriction
The government has upheld the restrictions on property acquisition for non-filers in the Mini Budget of 2018-19, leading to a significant downturn in the luxury property market. The scarcity of filer buyers has made it exceedingly difficult to find interested parties. Furthermore, overseas Pakistanis must now furnish a bank certificate as evidence of funds transferred from abroad within 60 days prior to property registration. These two legislative measures have resulted in a marked reduction in investment in the real estate sector, culminating in a nationwide decline in property prices.
5. Naya Pakistan Housing Scheme
Pakistan is currently facing a housing crisis, with a need for 12 million new homes. The government plans to develop 200,000 housing units and provide 5 million houses on installment plans through the Naya Pakistan housing scheme. This initiative offers affordable housing options that have attracted individuals who were previously interested in buying properties in private housing schemes. As a result, the development of this project has reduced investments in private housing societies and real estate projects, which has led to a decline in real estate prices across Pakistan. Besides this, Mall of Korang is one of the best investment options in Pakistan
Pakistan’s real estate future has undergone significant changes with the implementation of new rules and policies. Firstly, parking black money in the real estate sector is no longer possible, which eliminates the space for speculation and illegal investments. Secondly, properties can only be used for living or commercial purposes, unlike the old tradition of indiscriminate use. Thirdly, abnormal property prices will no longer be prevalent, and future prices will change gradually and steadily. Lastly, every taxpayer will be able to own a home in Pakistan, ensuring that all businesses are fair and transparent.
Also Read: Should I buy a house now or wait?