The world has metamorphosed into a global village where high interconnectivity and dependence have transformed real estate into a local and global asset. Geo-political incidents and events happening in one part of the world have repercussions that easily undulate across countries. The emergence of innovative technologies, international relations, rising inflation, and climate disasters have varying effects on global real estate. These lead to the production of inducements for investors to be enticed towards or repulsed from certain global real estate markets. Although the real estate industry of Pakistan might be local, that doesn’t necessarily protect it from the major events occurring worldwide. This is due to the internationalisation of the real estate industry of Pakistan, where its services and operations have expanded beyond the local markets to a worldwide base. Prospective investors and international real estate companies may take an interest in land or property, accelerating the real estate demand from different places worldwide. What proceeds are multiple foreign investments that allow distant assets to be purchased, and this can have great effects on the local real estate measure.
Global Events that Impact the Real Estate Industry
Increasing Globalization
Globalisation has led to the internationalisation of various sectors associated with the real estate industry. As a result, real estate companies, agents, brokers, developers, etc., have extended their services worldwide. For example, Pakistani real estate company Agency 21 has multiple offices in various cities of the country and has an office in London as well, which oversees European operations (agency21, 2022). Due to the increasing real estate business practices, the real estate supplies and management are going through changes due to offshoring. Developing countries like Pakistan offer cheaper construction materials and inexpensive labour costs. These essential functions have been shifted outside the local region. Moreover, increasing globalisation is also causing a change in the demographics of Pakistan, leading to growing demands for housing units. Currently, Pakistan is facing a shortage of 10 million housing units, and the number is increasing each year (Durre-e-Nayyab, 2022). Relocation of the major population from rural to urban cities will mean more housing units, eventually boosting the country’s real estate sector.
Advancements in Technology
The advancements and developments in technology have a profound effect on all socio-economic sectors. Even Pakistan’s real estate industry cannot ignore the technological transformation anymore. Many real estate companies are adopting innovative technologies to provide solutions and resources like green practices, micro homes, renewable energy resources, and PropTech technologies. For example, Lahore Real Estate Company offers 3D virtual tours of properties and homes to keep up with the demands and new trends of the tech-savvy generation (LRE, 2022). Moreover, innovative technologies are increasing the resourcefulness and energy efficiency of buildings, leading to the adaption of “smart” buildings. Ease in communication and accessibility of information and technology is improving the utilisation of space in real estate projects leading to the facilitation of amenities and services required by the investors. Furthermore, mobile apps and software are used for real estate marketing, property buying, selling, verification, and inspection. For example, the PropSure app provides the above-listed services from the comfort of a home, making the real estate experience hassle-free and transparent (Propsure, 2022).
Climate Change
Climate change is causing havoc in different regions across the world, which is forcing the industrial and economic sectors to opt for environment-friendly practices to lessen their pace. Since buildings are responsible for 39% of carbon emissions, therefore, this sector is focusing on climate emergency by adapting to sustainable practices (World Green Building Council, 2022) . In Pakistan, the 2022 monsoon floods have displaced 33 million people and killed more than 1000 people (skynews, 2022). The climate emergency in the country has made people environment conscious, leading to growing demands for green and sustainable practices in all sectors, including the real estate sector. Therefore, real estate companies are undergoing green transformation to attract prospective clients. Moreover, it also helps these companies stand out from their competitors. Currently, there are 18 to 20 green buildings in Pakistan that are LEED approved and registered with the US Green Building Council. These include British Council Library in Lahore, NCC Karachi, Mega Corporate Office – Karachi, and so on (Landscape , 2021).
Urbanization
Population growth, increasing income, middle-class growth, and urbanisation are one of the changing demographic trends. This is having an impact on the residential and commercial real estate markets, where a prominent change in demand is expected. Urbanisation is resulting in an economic boom by increasing the demand for properties and attracting investments in the real estate sector. Pakistan is expected to become an urban-majority country by 2030, with more than half of its population, about 250 million living in cities (Beacon Investment, 2021) . With proper planning and strategy, this rapid urbanisation can convert major cities of Pakistan into economic hubs and global drivers of development. However, negligence and ineffective policies can lead to economic and political instability. Urban Pakistan generates 55% of the country’s GDP, although 38% of its population lives in cities (Pakistan’s Growth Story, 2019). Moreover, the massive migration of the population from rural to urban cities is leading to the development of multiple housing schemes, commercial buildings, and affordable housing units in the country. It is not only creating job opportunities but also attracting foreign investments from overseas Pakistanis.
Impact of OBOR
One Belt One Road is a Chinese project to strengthen economic prosperity among countries and continents. One of its sub-projects or initiatives is CPEC or China-Pak Economic Corridor. It includes multiple infrastructure projects which will act as an economic belt between the two countries and develop the country’s real estate. The real estate of Pakistan is growing rapidly, and CPEC will aid further developments due to the establishment of various housing projects, the growth of numerous sectors, and the creation of job opportunities. CPEC is also expected to lead to the prosperity of individuals causing them to own and invest in the real estate sector of Pakistan. The value of surrounding locations is also increasing due to growing road infrastructures. With CPEC, many industries are expected to be set up in Gawadar, and there is every possibility that people of different nationalities will move to this area and ultimately increasing the need for accommodation which is expected to be fruitful for the Pakistani real estate industry.
Rising Inflation
With inflation becoming visible on the horizon, many real estate businesses are being affected. Many goods, services, construction materials, and labour costs are becoming expensive, which leads to priced rental homes and properties. Investors have a hard time investing in the real estate sector, which is impacting its growth. For example, the average price of a house in Lahore was US $73 per square foot in 2020, which is 6.25% higher than in 2019 (Mehmood, 2020). Many low-income individuals are unable to afford housing in the cities. As a result, a lot of slums and ghettos are expanded within and on the outskirts of these cities. As a result, green belts, forests, and swaps have encroached. Moreover, the occupied land becomes inefficient, which can be used for many developmental projects adding to the growth of Pakistan’s economy. On the other hand, property value increases, and rental prices go up with the rising inflation, which is beneficial for owners or landlords.
Conclusion
The conversion of local real estate into global real estate has made it prone to changing global events. The result has been volatility in every type of investment residential, from commercial to rental properties. Global instability often causes foreign investors to safeguard their money by investing in the real estate market of developed countries. As a result, developing countries like Pakistan suffer. Therefore, the government needs to formulate effective and resilient real estate policies which act as a driving force in developing and promoting this sector worldwide and limit the radical shift due to sudden inconveniences caused by global events. Pakistan’s real estate is a strong hand with massive potential. Therefore, developing and working in this sector is crucial to ensure a progressive economy and a better future.
References
agency21. (2022). Retrieved from agency21.com: https://www.agency21.com.pk/contact
Beacon Investment. (2021). Retrieved from https://beaconinvestment.org/urbanization-trends-and-projected-demand-for-real-estate-space-in-pakistan/
Durre-e-Nayyab. (2022). Pakistan Institute of Development Economics. Retrieved from pide.org: https://pide.org.pk/research/the-assumed-shortage-of-housing-in-pakistan/
Landscape . (2021). Retrieved from https://landscape.com.pk/green-building-standards-in-pakistan/
LRE. (2022). Retrieved from https://lahorerealestate.com/virtual-tour
Mehmood, T. (2020). Globe Estate Builders. Retrieved from https://globeestatebuilders.com/effect-of-inflation-on-property-in-pakistan/#:~:text=an%20unmanageable%20mortgage.-,The%20latest%20trend%20of%20House%20Prices%20due%20to%20inflation,2.89%25%20when%20adjusted%20for%20inflation.
Pakistan’s Growth Story. (2019, May 20). Retrieved from https://devpakblog.com/2019/05/20/urbanization-and-growth/
Propsure. (2022). Retrieved from https://propsure.com.pk/
skynews. (2022, august 29). Retrieved from news.sky.com: https://news.sky.com/story/why-pakistan-is-at-ground-zero-of-the-climate-crisis-after-suffering-deadly-flooding-12684458
World Green Building Council. (2022). Retrieved from https://www.worldgbc.org/embodied-carbon
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