Essay on Real Estate Market

Karachi initiated the upgrade of the real estate sector as an industry in Pakistan. Karachi's real estate agencies existed even before Pakistan's independence. These few agencies have been located near today's Bandar Road at Old Karachi. There were barons constructing houses and recruiting daily salaries for laboratories. Rarely plot sales took place, in rare cases, these deals were initially of a few thousand or a few lakes.

The 1950s-1960s

In the 1950s, when areas such as Sindhi Muslim Society, PECHS, Nursery, and Tariq Road gradually became populated, the real estate market began to progress. DHA came into being in the late 1950s, and plots in DHA gained some boom in 1960, but prices back then were still very reasonable. The plot allotments were made against some rupees and sold out against a couple of hundreds. Allotment against a few hundred took place after some time and deals were finalized against a few thousand. Over time, people became aware of the benefits and returns of property ownership in the city. People migrated rapidly from small villages to cities, and this trend in the Karachi real estate sector spread widely across the country. We can say that Karachi's district South's real estate market is the nursery of the real estate market in the country. The district South market, which began to advance in the mid-1960s, is gradually becoming the backbone of the economy of Pakistan. Now the real estate market has developed to the extent that the wheel of nearly 50 industries can be spun by a single construction.

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It is almost impossible to obtain data from the initial phases of the real estate market in Pakistan. However, we have the data taken from some of the city's most senior real estate agents since the beginning of 1970. These data will help the real estate market's newcomers. This research will benefit future work and ultimately complement the industry's professional trends.

The 1970s

From 1970 to 1974, the real estate market progressed normally and steadily. The market was boosted during 1973-1974 when the Amnesty Scheme was introduced by ZA Bhutto. This boom continued until 1977. Karachi's real estate market crashed with the disastrous flood in DHA and post-election riots in the city.

The 1980s – The Afghan War Era

The graph that fell remained consistent until 1982. When the Martial government gradually established its feet and because of the Aghan war, Pakistan became the focal point. That war brought a great deal of financial and moral support from around the world to Pakistan. This positivity resulted in a long-lasting market boom from 1982 to 1988 until Gen Zia ul Haq died in an aircraft crash. The then-president's sudden death caused uncertainty in the country's political scenario that led to the real estate market crash from 1988 to 1992.

The 1990s

From 1992 to 1994, the market began to progress slowly, but in these years, the overall condition was still below average. From 1994 to 1997, the property market saw its next thrust. In these four years, the real estate sector has undergone significant development. The catastrophic rains and power crises caused the market to fall in 1997. From 1997 to September 2001, the market suffered a recession.

The 2000s

Pakistan's real estate market saw a big boom after the incident of 9/11. Following the 9/11 incident, the market upturn broke all records of its previous peaks. This escalation of the real estate market dragged away from a common Pakistani concept of house ownership. In the early 2000s, the massive price rise disallowed many genuine buyers to buy a property. In 2005, the next recession overthrew the market. The recession lasted for a long time until June 2010. The main reason behind this recession, according to experts, was the sky-high property prices. From July 2010, the market started to mend delicately. In 2012, this mending process had a boom that lasted until November 2015. The reason for the recession was once again overpricing. The market again rose to break records of the past 8.9 years after a slight drop in November 2015.

Finance Bill 2001 Amendment

On June 7, 2016, the federal government approved the amendment in the Finance Bill 2001, which was made public on June 28 by advertising in various newspapers. This development has created the howls of short-term investors and others associated with this domain. The reason behind the outcry was the government's indication that the property's market rates would be regularized soon according to the rates approved by DC. The indication came from the government without any mechanisms and proper homework. The attempt was made after nearly 12 years by the federal govt and after 6 years by provincial governments. There was a lot of effort to reduce the gap between market rates and DC rates. Negotiations between government officials various real estate agent unions and associations and other real estate industry professionals resulted in the 80/20 ratio agreement, where 20 percent represents the documented gray economy and the rest of the 80 percent will be the undocumented black economy.

Role of Short-term Investments

Over the past 6 years, Pakistan's short-term investment opportunities have flourished. Indeed, the two major factors including the factor of 9/11 and the uninterrupted factor of democracy from July 2010 to June 28, 2016, have left remarkable signs of fruitful short-term investment in Pakistan's economy. This short-term investment peak will be beneficial to a few in the future, but many will suffer as a result. The disasters made by the ' economic terrorists ' have created this shiny market of short-term investment. Many white-collar businessmen have invested their untaxed, unregistered, and undocumented money from other businesses into this domain with lucrative returns in mind. Interestingly, in the six years of business slackness and unproductive short-term investments, provincial and federal governments have done nothing deliberately or perhaps carelessly to control pricing in the real estate market. The prices could have been controlled by the respective governments simply by moderately increasing the DC rates every year. The government's move could at least keep the residential property within a common man's reach. Therefore, since there was no government action, a large portion of documented investments in the white economy fell into the grey economy. Now, the federation and chamber representatives see it as a threat (previously, they were worried that people would shift their investments from manufacturing industries to unproductive trading in plots and that investor money would eventually be stuck). In such circumstances, at least at the moment, no one is willing for a documented economy of 20 percent.

What's Next?

These 13 rounds of the market for real estate seem quite balanced. Comparatively, over time, economic progress has changed both nationally and internationally, as well as geographically. In Pakistan, especially in Karachi, where the population has grown dramatically, the real estate trends have changed. The boom of the real estate industry and the unregistered, undocumented, and untaxed investments of white-collar people modified the dynamics of the economy and the professional behaviors of the masses associated with the real estate market. However, it remains to be seen whether the market will continue with its 45-year-old trends or deviate from its path due to the activities mentioned above. The trends show that irrespective of any excuse. The main reason for the market recession was always overpricing. For the 43 years of its 69 years, the patterns of market trends remained the same. The period from the peak point in the recession to the peak point in the boom is essentially 4 to 5 years. However, for unpopulated areas, the proportion of price increases in populated areas is 4 to 5 percent, which is around 9 to 10 percent. When a recession began, prices fell from 0.5 to 1 percent in populated areas and prices of unpopulated areas dropped to nearly 5 percent or 50 percent of the previously increased price. However, the market is no longer able to proceed with the same trends. Even though the country's real estate trends are similar to what they used to be, other external factors have changed now. We must therefore wait and see how market forces are going to affect the real estate market.

We found three different kinds of opinions on the market's current inactivity.

Based on the previous 69-year track record, some people are convinced that there is a fair chance of another four-year recession. These people believe that the market does not go back on track anytime soon, even if the government takes a U-turn and reverses its decision.

Some people think this plot trading turned out to be a stock-like market. Therefore, the period of recession would not be long and after a slight correction, the market would be stable.

The third type of people believes that the market will boom endlessly if the government reverses its decision.

We have to wait to see which opinion is going to dominate. Each opinion has its importance, but it seems that if we look at history, database research, and the policy of the government to discourage and prevent investment in this domain, the market will again follow its 69-year-old pattern. Indeed, if the government continues to document the economy's white policy, the recession will get longer and it may turn out to be worse.

Let's see how far the government's efforts to bring unregistered, undocumented, and untaxed investments into the white economy will be successful. Experts also want to assert that what are these efforts ' negative and positive impacts on the real estate market.

The stats discussed above are related to usual and average plots as in many cases, commercial plots with a good geographical location have appreciated their value thousands of times. This trend may also be revealed by dedicated research for selected areas. Even though these stats are about a single part of Karachi's real estate market, but is a historical fact that Pakistan's real estate market was born from this neighborhood and transformed over time into a service industry. This volatility, therefore, represents to an extent the real estate market of the entire country.