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How to Invest Right in the Real Estate Sector of Pakistan?

By 14/11/2022 0 Comments

Real estate investment is a great way to generate income. The industry offers buyers, sellers, and investors profitable opportunities to earn a massive profit on their capital. The rapidly growing population of Pakistan has increased the significance of the real estate industry leading to exceeding demands and opportunities. This sector has potential as it can add to the value of the country. Rapid urbanisation, increasing housing needs, and developing infrastructures appreciate the investment over time. Moreover, this sector offers minimum risk and the investment does not vanish at once. Therefore, careful measures must be taken before investing in the real estate industry of Pakistan. Due to the lack of proper planning and regulatory authorities in the country, extensive and careful research about the property, buyer or advisor must be conducted to assure that the investments are made in the right place. Furthermore, dealing with a trustworthy advisor is always a safer option than relying on a word of mouth. The collection of information and data prevents encounters with non-reputable buyers or malpractices in the form of false documentation, false listings, or lack of verification. However, with the increasing number of real estate companies in the country, the process of making investments in this sector has become quite easy. Following is a proper guide on how to invest in the real estate sector of Pakistan.

Why should you invest in Real Estate Sector?

The majority of the people in Pakistan either invest in gold or land as both are long-term investments. However, real estate is the best form of investment as it is the future of the country with great potential. It is estimated that this sector can meet the increasing housing demands and make Pakistan’s economy grow by making 1.5 to 2 trillion USD. The following are reasons why investments in the real estate sector are always a good idea. 

Personal Satisfaction

Investing in real estate gives a sense of satisfaction and fulfilment as it secures the future during periods of inflation. The prices of property and rental income tend to rise during inflation thus the investor earns higher than before.

Tax breaks

When financing a real estate product, the income is adjusted in a way that the investor can take advantage of various tax breaks and deductions. The investor pays less tax than owed therefore money is saved during tax times.

Investing can be tax-efficient

Investing can be tax-efficient

A bigger Asset Portfolio

Investments in the real estate sector result in portfolio diversification. Asset portfolio includes various types of real estate such as commercial, residential, tourism, malls, etc. Some of them are easier to sell and some can be maintained for longer periods, giving the investor full freedom to preserve the capital.

Cash flow and Equity

Real estate investment is a reliable means to make money. It generates regular cash flow over time and helps multiply equity. For example, increasing rent allows for an increased income. As a result, more investment can be made in the form of buying properties leading to more income generation or wealth.

Financial Security

Making sound and the right investment in real estate ensures passive income and if a property is appreciated, it results in financial security in the long run. It secures the finances and promises benefits in return.

Property Appreciation

It is the gradual rise in the worth or value of a property. When the value of a property is optimal, profit could be made by disposing of it. Also, rents tend to increase

use over time ensuring greater cash flow.

Stability

The real estate market does not undergo sudden changes like the stock exchange, stocks, bonds, or the retail industry. In real estate, the investor spends the money on tangible assets by directly getting involved with the said investment which rarely loses appreciation or value. On the other hand bonds or stocks are more volatile and risky investments.

The Right Way to Make an Investment

Conduct Proper Research

Conducting extensive research on where you want to invest reduces the probability of loss. Collecting data and information about the current economic trends, the value of property in the market, and laws and regulations implemented in the real estate sector will aid in the decision-making process. Also, doing a background check about the advisor, developer, client, or demand of a property will ensure a safe and promising investment.

Follow the Ownership, Approvals, Demand and Delivery(OADD) process:

OADD is a four-step verification process that will confirm that the investment being made is the right one. The process is as follows,

Ownership

More than 60% of court cases in Pakistan are related to land. Thus, the investor must check and confirm the ownership of a property, its records, and confirmation from the authorities in case of litigation before investing.

Approvals

Approvals are required in multiple areas such as NOC and approved Layout plans, Approved builder’s plan letters, No Objection Certificates by authorities, and so on. Always check the real estate project’s approval with the system or the regulatory authorities. If the project or offer has all the required and necessary approvals, then go ahead with the investment.

Demand

In Pakistan, the majority of real estate projects are profit-based and not demand-driven. Always identify the value and demand of the property before investing in it.

Delivery

Before investing, check and verify the developer’s record, professionalism, past projects, and certification.

Comparative Analysis of Property

Avoid relying on the word of mouth from a single source and follow the offerings of the broker. Always compare the value of the property with other properties by conducting a detailed comparative analysis. It will help identify the competitors, prospects, and challenges of the investment and listing prices. Seek expert opinions or guidelines about the real estate market so it becomes easier to plan future buying and selling. The service could be availed from reputable real estate agencies as well.

Buy from Reliable Advisor

Property dealers or advisors have the experience and knowledge about the real estate market and help their clients find the best investment opportunities. Before making a deal, run a confirmatory background check to avoid scams. Meet the seller face to face, go for a site visit and check the reliability of the advisor with the regulatory authorities.  This will prevent dealing with malpractices in the form of fake documentation, false listings, and unreliable agents. Once the advisor’s credibility is verified, go ahead and invest.

Explore the Online Real Estate Market

Multiple real estate corporations and agencies in Pakistan provide online services that are one click away. These services involve property verification and inspection, technical advisory, forensic audit, and so on. Exploring the online real estate market makes the complicated and intimidating real estate journey easy. This is a quick and safer option where the investor can explore the real estate market at home.

Online markets make the real estate process easy

Online markets make the real estate process easy

What to Avoid?

Ignoring ROI

Return on Investment (ROI) is significant in real estate because it determines whether investments should be made in a particular property or not and how these investments compare with other similar properties. Always be sure of the return on investment before investing in a property. To reap the benefits of the investment in abundance, do not settle for quick monetary gains or short-term returns. Instead, invest in projects that propose a long-term investment return that is more sustainable and beneficial in the long run.

No Backup Plan

Making investments in the real estate sector may not generate profit quickly. The property may not sell for a long period or does not generate rent.  Therefore, do not invest in vacant properties. Check the return on investment, profit, and benefits of your investment. Always have a backup plan by evaluating all the pros and cons of your investment before making quick decisions.

Investing in the Wrong Property

Do not invest in any or every real estate hastily before doing a comprehensive research. Properties mentioned on the lists for more than four months are a no-go. Furthermore, property files or titled documents that are based on a promise to sell are either unapproved, infeasible, or fraudulent. Always investigate before spending the savings on the wrong property.

Not Hiring the Real Estate Advisor

Research and data collection before investing in the real estate sector could be a tedious task. Investing in real estate without the required expertise or know-how of the market trends is a big risk. Therefore, hire the right people who make the real estate journey easy.

Conclusion

Investing in the real estate sector is a process that requires careful assessment and consideration. Lack of planning, unreliable advisors, or investment in the wrong property can lead to the depreciation of investment. Therefore, to generate an income flow through investments, knowing the trends of the market and system is essential.  The appropriate research and going through the four-step verification process of OADD ensure a safe and profitable investment. Moreover, the rapidly growing real estate industry of Pakistan promises a profitable business. Hence, investing in this sector never goes unproductive. Making the right real estate investment comes with a lot of lucrative opportunities which cannot be missed. It only requires proper planning and careful decision-making.

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