Pakistan is one of the fastest developing countries with a lot of promises for the real estate market, but there are also a number of difficulties that the real estate sector must overcome to thrive in Pakistan’s recent political unrest.
Incomplete paperwork, scams, and a lack of digitalization make it impossible for real estate to encounter significant difficulties. There are various factors that directly and indirectly affect the real estate industry in Pakistan.
Let’s look into some of the real estate challenges faced by Pakistan in 2022.
- Competitive Marketplace
- Higher Inflation Rate
- Interest Rate
- Economic Situation
- Rigid FBR Rules
- Lack of Digitalism
- Lack of Awareness
- Land Mafia’s Influence
Competitive Marketplace
The real estate market has recently grown extremely competitive in Pakistan; several real estate builders, developers, and investors have actively started to play their role and expressed a significant interest in the development sector, especially the luxury modern living high-rise structures, which have led to an increase sales expenses and other costs.
Finding an economical company has become more difficult as operational and sales expenditures have increased exponentially. However, the increasing competition in the real estate sector has certain benefits and pros, such as raising the standard of development and building in terms of luxury, convenience, and comfort. However, it damages the purchasers and investors since they deem the pricing to be excessively exorbitant. But if you are looking for a reasonably priced investment with high returns then we got you covered.
Higher Inflation Rate
Even if it has always been a problem for our nation, inflation in the last five years has outperformed all prior records, having an impact on all major businesses, including the real estate industry.
The higher inflation increases the prices in the market and directly and indirectly affects the rate of the products and the properties. Therefore, it is better to invest today to reap higher returns in near future.
Interest Rate
Since most firms and commercial sectors and even the real estate market rely heavily on the interest rate, it is always of the utmost importance to these sectors.
According to a recent survey, the interest rate in Pakistan is over the upper limit even if it has dropped from 11.10% in 2021 to 9.75% in 2022. Since most developers and contractors are heavily dependent on the real estate business, it suffers when interest rates are high since it is difficult to fulfill credit criteria.
Pakistan’s Economic Situation
One of the most important things that might change the direction of the real estate business is Pakistan’s financial shortages. Better and more stable economic conditions will consequently draw more investors and more foreigners to real estate investments since they reduce the likelihood of loss in this sector.
In contrast, if Pakistan’s economy remains unstable, the investor won’t risk their money and, in light of the danger involved, may even attempt to withdraw the money that has already been invested in our nation. The biggest reason behind our economic situation is our political instability that made investment insecure for foreigners as well as locals. And subsequently, the real estate business will also suffer as a result of this, leading to its downfall in the market.
FBR terms and Conditions of FBR
One of the major problems for Pakistan’s real estate market is the rigid and unforgiving FBR guidelines. From one perspective, it seems sensible to prevent tax thievery, but these laws are also restricting the real estate industry’s expansion in our state. The rules must be flexible enough to allow the real estate business to expand unrestrictedly since its growth is directly related to the growth of the nation by bringing more investment and indirectly money to the nation.
Lack of Digitalism
In Pakistan, there is a disconnection between real estate and tech; the Patwaris and manual registration and paperwork system are still in use, which is an antiquated idea with lots of room for fraud and mistakes.
To provide a flawless documentation system that is incredibly transparent and trustworthy, every system must be digitalized.
Lack of Awareness
Scammers may easily get individuals onto their web because of the evident lack of understanding among a significant portion of the population in Pakistan regarding digital fraud. People frequently invest without doing adequate research because they are ignorant of the risks and the consequence sometimes become catastrophic, which causes them to suffer serious losses and harms the real estate sector’s reputation in particular.
Land Mafia’s Influence
It is impossible to overlook the impact of land mafias in the real estate market of Pakistan. When someone purchases a piece of property, the land mafias using their political influence and authority unlawfully take possession of it. Despite having a lawsuit brought against them, unfortunately, they are so influential and powerful that they have the ability to influence the court’s and judges’ decisions. Therefore, people with medium income and even some wealthy investors avoid investing as a result in places or regions where land mafias are strong, which indirectly threatens the real estate sector.
According to historical figures, land mafias are so strong that they may even kill those who stand in their way. Since then, the majority of individuals avoid conflict with them and decide not to invest.
The Way Forward
The way forward to overcome all the above-mentioned problems, Pakistan has to make practicably effective plans to bring about successful outcomes. To protect the nation’s real estate sector, the government and ruling party as well as the opposition will need to take some serious and practical steps. Controlling inflation should be the government’s top concern since it has a negatively large impact on the real estate sector.
Furthermore, to liberate serious and potential investors from FBR’s tight laws and regulations and to regulate real estate market values, huge sums of taxes levied on people who are buying and selling should also be revised.
Moreover, the government must recognize the impact land mafias have on the real estate market, and those guilty of seizing other people’s lands and properties must face severe fines, consequences, and penalties. All the necessary action must be taken by the state to finish these land mafias’ influence and authority.
Additionally, the real estate industry faces a number of issues and difficulties that are caused by a lack of digitalization which also needs to be addressed on the national level. To solve these issues and challenges, every documentation, paperwork, and registration should be digitalized, avoiding inaccurate and dishonest handwritten documents and registrations as well as the old fashion Patwari system.
Final Thoughts
In conclusion, each issue and problem listed above has a specific remedy. Given the significance of the real estate sector, the government must take practical and sturdy action to make it resilient, accessible, and affordable.
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