There are numerous benefits of investing in real estate. From predictability in cash flows to excellent returns, tax advantages, and diversification, real estate is one of the most profitable ways of building wealth in any part of the world. Pakistan holds great potential in its real estate sector and can prove to be among the best investment avenues for local and overseas investors alike. The country has the highest per capita demand for housing in the South Asian region, and with the booming construction industry, Pakistan continues to see massive development projects being implemented in recent years. The sector also has the potential to make Pakistan a US dollar 1 to 2 trillion economy as only 0.5 percent of Pakistan’s land area is currently planned. With the government introducing reforms in the real estate sector such as establishing a real estate regulatory authority, allowing overseas Pakistanis to invest in real estate using Roshan Digital Accounts, and authorising the formation of real estate investment trusts (REITs), the future of real estate in Pakistan is promising. Continue reading to understand why Pakistan is the best place to invest in terms of real estate.
Why Consider Real Estate Investments
The average investor usually invests in stocks, bonds, and other assets, but real estate investments have many additional advantages that have always made them lucrative investments. Investors in real estate earn income through rentals, business activities based on the property, and appreciation over time. In most cases, land appreciates over time, and improvements in urban infrastructure have a positive effect. Additionally, rent increases every year, generating a significant cash flow. Furthermore, real estate investors can take advantage of tax breaks because loans mature over longer periods, and the owner can deduct reasonable costs from his earnings, such as buying, operating, and managing a property. Further, as one repays a loan toward a real estate investment, it increases the individual’s equity, which can then be used to purchase more real estate. Additionally, there are many real estate investment options that offer diversification of the investment portfolio. Inflation affects almost all assets, but real estate is considered the most powerful hedge against inflation. As GDP growth drives more business activity and demand for real estate, real estate maintains the buying power of the capital. Real estate is, therefore, one of the best investment options. When done correctly, investing in real estate is a complex process that can be extremely rewarding. A comprehensive investment strategy is usually not taken into consideration by most people who invest in real estate (Palmer, 2021).
Consider reading our investment guide here.
Why Pakistan’s Real Estate Sector is a Great Investment Opportunity
Pakistan is a great avenue for those who want to invest in real estate due to several reasons such as the introduction of regulations, authorisation of real estate investment trusts (REITs), a high per capita demand for housing, technological advancements, digital mapping initiatives, and measures to increase transparency and access to information. It is common knowledge among investors that emerging markets are far more profitable than those markets which have reached maturity and stabilisation. Therefore, investing in Pakistan’s real estate sector in this stage can be among the most rewarding investments. Looking at Pakistan’s economic growth of 4 percent, even after fighting through a pandemic and subsequent lockdown restrictions, the incumbent government is determined to give a boost to construction and investments in the real estate sector.
Firstly, steps taken by the Lahore Development Authority (LDA) can be highlighted to understand the commitment and resolve of the incumbent government towards uplifting the real estate sector. High rise building construction remained limited in Lahore to plots of land greater than 10 Kanal in size. Besides that, there were also many limitations and procedural bottlenecks which prevented developers and investors from initiating a new project in the city. Considering the high value of land in Lahore, few developers could enter the market with such high stakes and capital requirements. Therefore, the LDA has now brought significant changes to the process of project approval, regulation, and quality control to motivate developers and investors to come forth for the construction of high-rise buildings. This has led to the construction of more than 150 projects simultaneously in Lahore for the first time in the city’s history (Raza, 2019). Therefore, this shows that the real estate sector of Pakistan is moving towards a positive trajectory of growth.
Secondly, the Securities and Exchange Commission of Pakistan (SECP) has also approved the registration of the first Shariah-compliant developmental real estate investment trust (REITs). The Arif Habib Dolmen REIT has successfully collaborated with leading business groups to launch a developmental REIT scheme in collaboration with Silk Islamic Development REIT (SIDR). This is a welcome step for the real estate sector of Pakistan. REITs provide investors with many benefits, such as liquidity of funds, tax incentives on income, and management of investment portfolios by experienced managers in the real estate realm (Dawn, 2021). As a majority of Pakistan’s population is Muslim, and Shariah-compliant products are more popular among the masses, the step has the potential to generate good economic activity and investment in the REIT schemes.
Thirdly, Pakistan has the highest per capita demand for housing in the South Asian region. The country faces an acute shortage of housing due to rapid urbanisation and population growth. The incumbent government has taken welcome steps to tackle the challenge by giving the construction sector the status of an industry. There are more than 20 allied sectors of the economy that are linked to real estate, and with growth in construction activity, all these sectors are set to experience a boost in economic activity and growth (Haq, 2021). This presents investors with a golden opportunity to invest in the real estate of Pakistan as they have the option to diversify their portfolio over a wide area of products. As the housing shortfall has to be met some way or the other, digital mapping of Pakistan’s lands by a leading real estate company, Graana.com, Pakistan’s smartest property portal, can allow for the government to leverage data for urban planning of unplanned areas, increasing their value by seven times. Therefore, Pakistan is fast becoming the next big thing in real estate development, opening up opportunities for investors to earn big profits over time.
Lastly, the real estate sector of Pakistan is also experiencing a technological revolution. Technologies like artificial intelligence, big data, virtual reality, 3D printing, and generative design have a huge impact. Companies like PropSure digital solutions are taking the lead in adopting such technologies for a better, greener, and more secure real estate environment. The adoption of technology leads to greater transparency and access to information. Not only will that increase investor confidence, but it will also lead to accuracy in transactions by using blockchain technology and online Land Registry systems. Dispute resolution will also stand affected in a positive way, as a majority of court cases in Pakistan are related to land titles and rights (Home Office, 2017). Pakistan is looking toward countries like the UK, Dubai, China, and other developed nations for the adoption of technologies and development of human resources. Therefore, it can be understood that Pakistan is fast becoming the face of a new technological revolution of real estate in the South Asian region.
Moreover, with the launching of Pakistan’s smartest property portal, Graana.com, the real estate sector has seen the adoption of best practices being followed all around the developed world for increased transparency and the ending of money laundering practices. The company is also using artificial intelligence models to calculate property valuations. The practice can streamline the real estate marketplace and protect investors from speculation on behalf of market forces dealing in black money. Pakistan has also increased its status on the financial action task force publications to limit money laundering practices and terrorism-related activities. Investors often require a safe environment to ensure that their capital remains safe and secure. The Chinese report on investment and security also ranks Pakistan in the list of top business environment countries (The Express Tribune, 2021).
Conclusion
There are numerous benefits of investing in real estate, and with Pakistan getting serious about its real estate development and regulation, the country offers great potential for new investors to gain wealth and fortune. Coupled with a high per capita demand for housing and strong construction industry, Pakistan’s real estate sector holds the potential to uplift the country’s economy. You can also read our guide on how to invest in real estate to gain a better understanding of the steps involved in making a profitable investment.
Bibliography
Dawn. (2021). First REIT scheme compliant with Shariah approval. Retrieved from https://www.dawn.com/news/1632700
Haq, S. (2021). Construction sector takes off. Retrieved from https://tribune.com.pk/story/2282943/construction-sector-takes-off
Home Office. (2017). Pakistan Land Disputes. Retrieved from https://www.refworld.org/pdfid/588a0a134.pdf
Palmer, B. (2021). Key Reasons to Invest in Real Estate. Retrieved from https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp
Raza, A. (2019). LDA introduced reforms, updated laws in 2019. Retrieved from https://www.thenews.com.pk/print/591135-lda-introduced-reforms-updated-laws-in-2019
Dawn. (2021). First REIT scheme compliant with Shariah approved. Retrieved from https://www.dawn.com/news/1632700
Haq, S. (2021). Construction sector takes off. Retrieved from https://tribune.com.pk/story/2282943/construction-sector-takes-off
Home Office. (2017). Pakistan Land Disputes. Retrieved from https://www.refworld.org/pdfid/588a0a134.pdf
Palmer, B. (2021). Key Reasons to Invest in Real Estate. Retrieved from https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp
Raza, A. (2019). LDA introduced reforms, updated laws in 2019. Retrieved from https://www.thenews.com.pk/print/591135-lda-introduced-reforms-updated-laws-in-2019
The Express Tribune. (2021). Pakistan ranks top 10 in business environment: report. Retrieved from https://tribune.com.pk/story/2312185/pakistan-ranks-top-10-in-business-environment-report
Key Takeaways
Pakistan holds great potential in its real estate sector and can prove to be among the best investment avenues for local and overseas investors alike.
Investors in real estate earn income through rentals, business activities based on the property, and appreciation over time.
When done correctly, investing in real estate is a complex process that can be extremely rewarding.
Pakistan is a great avenue for those who want to invest in real estate due to several reasons such as the introduction of regulations, authorisation of real estate investment trusts (REITs), a high per capita demand for housing, technological advancements, digital mapping initiatives, and measures to increase transparency and access to information.[/fancy_box]
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