Efforts to attract investment in Pakistan have been only partially successul, mainly due to security concerns. But gated communities are showing the way.
Property sector aims to put down firm roots in Pakistan
Real estate has been an important sector of Pakistan’s economy, yet it has experienced low growth over the past few years. Investors have also been losing interest to invest their money in the housing sector because of uncertainty over the law and order situation in the country.
The government spends more than US$5 billion on construction from its annual development budget. The housing sector, however, gets less than half of the amount allocated for construction each year. The burgeoning population and rapid urbanisation calls for more housing schemes in the country. Private real estate developers have a crucial role to meet housing.
In view of the security concerns, private developers have resorted to building gated communities in major cities. Pakistan’s Bahria Town is Asia’s largest real estate developer and private housing society, which has practically implemented the idea of foolproof safety. Bahria’s ongoing projects, such as the JV D&B Valley, Golf City, Garden City, Bahria Icon, cover more than 1 billion square feet that will accommodate more than 1 million residents. Bahria’s 25,000 employees are delivering US$5 billion of iconic developments.
Administered by the Pakistan army, Defence Housing Authority (DHA) is a real estate organisationthat mainly develops housing for current and retired military officers. DHA has establishments in all the major cities including Karachi, Lahore and Islamabad. DHA City, one of the largest state-of-the-art residential-cum-commercial projects, is under construction in Karachi. DHA has also built gated communities. And the prices of residential and commercial property in DHA housing schemes have been on the rise.
Launched in 2008, DHA Valley is a joint venture of DHA, Bahria Town and Habib Rafiq Private. The project aims at developing a secure community with essential amenities. DHA Valley offers 1,125 sq ft and 1,800 sq ft residential plots for 650,000 Pakistan rupees (Dh22,749) and 880,000 rupees respectively, with a quarterly instalment plan for Pakistani residents. It also offers1,800 sq ft residential plots for US$12,900 for overseas Pakistani residents.
The winner of five awards from the Asia Pacific International Property Awards, Bahria Town is actually fuelling the growth of real estate sector in the country.
Bahria’s projects in Rawalpindi and Islamabad and the development of a gated community worth $6 billion in the twin cities is the great property success story. The amenities offered by Bahria Town attracted residents and allured real estate investors. It ensures a 24-hour supply of electricity, fool-proof security and other amenities. The value of real estate in the Bahria towns in Lahore, Islamabad and Rawalpindi has increased manifold in the past five years. The price of a 1,800 sq ft residential plot at Bahria towns in Lahore and Rawalpindi has increased up to 5 million rupees from 1.5m rupees in just three to four years.
Karachi, the country commercial capital, has endured stagnancy or a fall in property prices because of deteriorating law and order over the past five years. Bahria Town has come forward as the answer to many of the problems confronting the real estate investors. Bahria town Karachi is currently the focus of speculative trade in real estate. Frenzied investors are ready to offer triple the price for plot files. What is really a commendable the properties are financially accessible to the middle class. For example in the newly launched Bahria Town scheme in Karachi, the price for a 1,125 sq ft residential plot is 2.6 million rupees, while the price of a 2,160 sq ft plot is more than 5m rupees. Similarly, the price a two bed apartment is 2.6m rupees, while the price of four-bed apartment is 8.2m rupees. These properties can be purchased through instalments under a five-year plan.
Last March, Malik Riaz, the founder and chairman of Bahria Town, signed an agreement with Thomas Kramer, a US real estate tycoon, to construct Bodha Island City in Karachi, at an estimated cost of $20bn.
Property investment in Gwadar, southwestern Balochistan province is also regarded as a good investment after the Chinese took operational control of Gwadar port last year. The cost of land in Gwadar increased several times soon after the Chinese started work on the port project in March 2002. Pakistan-based Hashoo Group has already launched the Golden Palms, a project targeting non-resident Pakistanis of the UAE as well as locals. By virtue of its geo-strategic location, Gwadar has been designed to be operated as a hub port on the pattern of UAE’s Jebel Ali, Hong Kong and Singapore.
Constituting 2 per cent of the country’s GDP, the real estate sector can still grow and account for 5 per cent of GDP.
Efforts have been made by the government to revive the real estate sector. In 2012, it announced a drop for interest rates of mortgage loans in a move to encourage potential investors to invest in Pakistan properties.
Syed Fazl-e-Haider is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan, published in May 2004