Factors Influencing Pakistan’s Real Estate Market: Consumer affordability, interest rates, the state of the economy, taxes and government policies, and investments by overseas Pakistanis all play significant roles in the rise and downfall of Pakistan’s real estate sector.
The affordability of consumers is crucial in driving demand for real estate. As the middle class experiences an increase in income, more individuals can invest in properties, particularly in urban areas, leading to a rise in demand for residential and commercial properties.
Interest rates also have a notable impact on the real estate market. With a current interest rate of 13.25% in Pakistan, higher rates make individuals more likely to seek profits through savings accounts rather than investing in real estate. This reduces the demand for properties.
The state of the economy is a major determining factor. Pakistan’s economy has been facing challenges such as high inflation, political instability, and overall market uncertainty. These factors create a less favorable environment for real estate investment, resulting in fewer buyers in the market. Conversely, a booming economy has a positive influence on the real estate sector, but that is not the case currently.
Taxes and government policies also significantly affect the real estate market. Increases in taxes on property transactions, including stamp duty, withholding tax, and capital gain tax, along with higher property valuations by the Federal Board of Revenue (FBR), have contributed to a decline in the real estate market.
Furthermore, investments by overseas Pakistanis play a substantial role in the country’s property market. With an attractive rate of return, overseas Pakistanis annually invest around $8 billion in the real estate sector. The uncertain environment and the slowdown of the economy further contribute to their reluctance.
In summary, the rise and downfall of Pakistan’s real estate sector are influenced by factors such as consumer affordability, interest rates, the state of the economy, taxes and government policies, and investments by overseas Pakistanis. These factors collectively shape market conditions and determine the level of demand and investment in the real estate sector.