Investment in Pakistan Real Estate: Pakistan real estate has seen great growth over the past few years. Since 2010, property prices in Islamabad alone have almost doubled. Because of this positive trend, many people are eager to grab a piece of the cosmic pie of this booming niche.
If you are interested in jumping on the strip and don’t know where to start – just keep reading.
I am going to go through some internal steps that you must follow to get the best deal and avoid fraudulent estate agents who are ever ready to assert their innocent customers.
Do your research
Do not depend on agents only. Do your research using various property portals such as Zameen.com, OLX.com.pk, and Lamudi. Most of the PK prices in these portals are 20–30% higher than the actual market price.
Find plot or house market value
So you got a property that caught your eye? Great! Now you need to find its market value. You do not need a Ph.D. For doing this. You can cheat the same agents to find the sale value of the appropriate property.
Find the right agent
This is a difficult one and there is no straight answer. You need to talk to several agents and meet them. Simply select an agent that quotes the price closest to your estimated market value. Do not be influenced only by their luxurious offices, educated accents, or the many employees working under them.
Meet and talk to the boss face to face
Request your agent to set up a connection with the owner. Never treat an agent quickly. Verify ownership by checking the allocation/transfer letter with the NIC.
Many agents will make excuses that the owner is not in the city or abroad. Just don’t buy those excuses and walk away from the deal.
Give token money to finalize the transaction
Excellent, I hope they didn’t add you to the conversation. Once you finalize the price and payment terms, you will have to give the owner a token of money so that you are obliged to both transactions. Request for a receipt from the owner/agent about the token money. Keep some things in mind:
- Your token money should be between 50K to 1Lac.
- You must bring a copy of the allotment or transfer letter.
- The token receipt must contain the property’s full address or file number.
- It should be mentioned in the token receipt that there is no suit or payment on the property.
- This token money is counted in the total value of an asset.
Ask your agent to verify the allocation or transfer letter
Yes, it is part of his commission to give you a safe deal. Up to this point, you do not need to pay anything to your agent. If you have the time and are working with an agent for the first time, it is better that you go to the Society’s office to check its status.
Pay using bank pay orders
- Avoid using cash. Always be better and safer using pay orders.
- Each society has different taxation rules.
- The agent’s commission is 1% of the total price.
Pakistan real estate market
Pakistan’s high inflation suggests that house prices are rising strongly. But this is an illusion. According to Pakistan’s largest property portal zameen.com, nominal house prices have increased by 5.05% to PKR 10,875 (the US $ 77) per foot (sq ft) during the year 2019. However, when adjusted for inflation, house prices fell to 998% at the same time.
Major cities of Pakistan:
- In Lahore, the average house price in Q1 2019 was PKR 10,402 (the US $ 73) per square foot, up from 6.25% a year earlier, but down 2.89% when adjusted for inflation.
- In Karachi, house prices averaged PKR 13,158 (the US $ 93) per square foot in Q1 2019, up 4.25% from the previous year, but down 4.62% when adjusted for inflation.
- In Islamabad, house prices equalized PKR 9,980 per square foot in Q1 2019, up 7.01% from a year earlier, but down 2.2% realistically.
Pakistan Rupee (PKR) March 2011 PKR 10 PK to US $ US Bank (SBP) lost 25% of its value against the US $ 1 in March 2011 = the US $ 1 PK in March 2011, US $ 1.1 comparison in March 2011 in. The country’s central bank decreased its currency many times. The government is in talks with the International Monetary Fund (IMF) to address its current account balloon and the fiscal deficit that may upset the balance of payments crisis.
Real estate tax avoidance
According to SBP, Pakistan has a large informal economy, which is estimated to be around 70% to 91% of GDP. The country’s property market has a large share of unchanged profits, mainly due to lower regulatory oversight, coupled with much lower official property valuations.
These characteristics of the property market make it easier for individuals to conceal their assets and sources of income, while at the same time reducing their tax liabilities.
District Collector (DC) rates, which are much lower than real property valuations, are used to calculate provincial tax liabilities, such as capital value taxes, property taxes, and stamp fees.
In 2016, the Federal Board of Revenue (FBR) introduced new valuation tables for the collection of capital gains tax, with new rates exceeding DC rates at the federal level – but still below the properties’ market rates.
The difference between their valuation and actual market values is shown in the table below. Thus, despite the strong activity, total revenue collections from the property market remain low.
- Low asset valuation, combined with weak regulatory oversight, also clearly explains why speculative buying is widespread.
- Real estate is purchased as a commodity in Pakistan; Speculative investors buy the property in bulk, and then later sell it at an exorbitant profit.
