Real Estate in Pakistan: Opportunities & Challenges

Introduction

Over the past few years, Pakistan's real estate has made significant progress. It is fueled by urbanization and increasing foreign investment. The real estate in Pakistan is diverse, with varying trends across different regions. Major cities like Lahore, Karachi, and Islamabad are experiencing rapid development. At the same time, secondary cities are also catching up on developmental progress. Real estate offers a plethora of opportunities for investors willing to navigate its dynamic landscape. In Pakistan, this sector is experiencing a sudden increase in demand for luxury apartments and affordable houses in major cities. According to the Pakistan Economic Survey (2021-22), real estate activities have a 5.6% share of GDP and 9.6% in services.

According to the current situation, Pakistan real estate is going through an undesirable situation with high interest rates. It ultimately results in fewer property transactions. Moreover, this sector is lagging far behind its potential due to several challenges, including political instability, complex legal procedures, etc. In 2024, the market value of residential property has decreased to $1.28 trillion. But, it is expected to increase in the next year. You can expect to hae better investment opportunities in the coming years according to the statistical graph. The commercial market value has increased from $0.60 trillion to $0.70 trillion. It indicates continuous improvement in the value of commercial projects. According to Statista, the real estate transaction value for the year 2024 is $11.04 trillion in Pakistan and is expected to increase up to $13.99 trillion in 2027. The real estate industry is expected to revive after 2029 by making slow and steady progress.

Opportunities in Pakistan's Real Estate

Pakistan's real estate market is brimming with opportunities for developers, interested investors, and home buyers alike. It is a traditional way of investment and gives stable returns or huge profits when people make the right choice. In the past few years, many changes have been introduced in the real estate sector, and several opportunities have been provided to people.

Affordable housing projects

Pakistan's real estate sector is offering an opportunity for affordable housing projects to people so that middle or lower-income segments of the population including daily wagers can get their own house. Such projects are in high demand in major cities of Pakistan where people migrate to seek jobs. It improves living standards and reduces the growth of informal settlements. So, the development of low-cost residential units seems to present a lucrative opportunity to those living in rental houses or looking for a suitable payment plan to pay affordable installments.

Integration of Technology

The trend of smart cities is rising day by day and real estate developers are focusing on the integration of technology and the introduction of smart features to improve lifestyles. Many smart city projects have been launched in the big cities of Pakistan, and developers are also planning to introduce such projects to other cities. Lahore Smart City, Smart Housing Multan, and Capital Smart City are a few notable projects in different cities of Pakistan, and much more are in progress. These integrated technologies help monitor and manage urban infrastructure, like water supply, waste management, and usage of energy.

Appreciation in Value

Properties in modern societies are more likely to appreciate faster due to their strategic location, advanced facilities, and enhanced living standards. Today's investment in the modern societies of Pakistan can lead to significant capital gains in coming years. As cities continue to grow, urbanization, prime locations, rising demand, and development of infrastructure drive up property values. The high ROI potential of properties in smart societies provides an excellent opportunity for investors to buy real estate and enjoy profitable returns.

Sustainable or Green projects

In Pakistan's real estate market, sustainable and green building projects offer a lucrative opportunity. These cater to the growing demands for environmentally responsible living spaces that align with global sustainability trends. With awareness of environmental issues, there is a growing market for sustainable and eco-friendly buildings. So, the developers are focusing on the incorporation of energy-efficient designs in their projects. The initial investment is higher but provides long-term savings on water, energy, etc.

Development in Commercial Real Estate

There is a need for commercial spaces, including shopping malls, industrial parks, and office buildings with growing business activities. Also, the retail industry and industrial and warehousing facilities are expanding rapidly, fueled by the growth of e-commerce and rising consumer spending. Developing co-working spaces in major cities of Pakistan can tap into this growing market. Such developing commercial properties offer potentially high returns compared to residential properties. Furthermore, investment in commercial properties allows diversification as industrial units, offices, and retail spaces cater to various market segments, reducing risks and enhancing portfolio stability.

Vertical Housing Projects

High-rise buildings and vertical housing projects are commonly seen in major cities of Pakistan, where land is scarce and expensive. These cater to the growing demand for urban living spaces, especially among small families. This approach maximizes the use of available land, which is crucial in densely populated cities because migration creates a high demand for residential units in urban areas. Furthermore, it is directly related to affordable housing opportunities as the cost per unit is less than those homes designed for single families.

Challenges in Pakistan's Real Estate

There is a shortage of houses in Pakistan due to several factors having a direct influence on the real estate industry. In addition to offering opportunities, the real estate industry faces several challenges. Some challenges are economic or political instability, inadequate infrastructure, lack of planning, and environmental concerns.

Political and Economic Instability

It is one of the major challenges to the real estate industry because this instability leads to market uncertainty, fluctuating marketing values, changes in policy, and delays in the construction process. Such issues make investors hesitant to invest their savings in real estate. They prefer to buy gold, keep their money in banks, or wait for a stable time to make large investments. Political and economic instability can cause property values to fluctuate unpredictably and disruptions in the supply chain. It makes it challenging for developers and investors to plan long-term projects. Addressing these challenges requires stable governance and a focus on creating a secure environment.

Lack of Planning & Regulation

In Pakistan, there is a lack of basic housing facilities despite the fast-growing population. The increasing population will lead to a crisis situation because no one is paying attention to the shortage of houses. Regulatory issues made it hard for people to believe that their investment is safe and secure. Additionally, there is no proper ministry for the real estate sector to streamline all property-related procedures, authorities, and stakeholders despite the fact that it is being treated as a distinct industry in many countries. This issue presents a significant challenge to the real estate sector because unregulated development and inconsistent zoning regulations affect the quality of life due to incompatible land.

Lack of Transparency

There is a lack of transparency in transactions and property dealing; that's why people do not show as much interest in the real estate sector. It is common to see victims of the real estate market's fraudulent practices due to lack of access to the information. Almost 38% to 40% of the capital from real estate gets stuck due to such practices. Now, Pakistanis prefer to keep their savings in the bank instead of investing in housing projects because people belonging to the real estate sector sell encroached or non-existent properties to rob their money.

High Interest Rates and Inflation

Another big threat to the growth of Pakistan real estate is that people are not financially stable due to unemployment and bare minimum income. According to an estimation, there are almost 2.5 Crore Pakistanis who live in rental houses and cannot afford to buy one for their family. They are living from hand to mouth and cannot manage to save money that can be further invested in any project. According to the National Institute of Economic and Social Research, a 3% increase is observed in inflation in the year 2023. In the near future, it is expected to rise significantly. Furthermore, the increase in the prices of construction materials posed a challenge to developers for providing affordable houses.

Conclusion

Real estate market of Pakistan is evolving rapidly and offers immense opportunities for investors. It is influenced by advancements in technology and global trends. Some challenges are not for the people but for the real estate agents dealing in commercial or residential properties. They have to struggle to make themselves stand out among several real estate companies and convince people by offering distinguishing and extraordinary services.

People are willing to invest in the real estate business in Pakistan, but only if they find a secure project from trustworthy developers to ensure that they will get a good profit in the next years. Pakistan property prices are currently not much higher, so it is a good time to invest in affordable housing projects with excellent amenities to reap the benefits tomorrow. With the right knowledge and approach, investing in a growing sector can yield substantial returns. Buy a property in Pakistan by choosing projects wisely and leveraging the potential of the real estate market.

IES Marketing holds a significant place in the real estate market for providing amazing opportunities to people so that they can get their dream house at an ideal location. We are known as a trustworthy real estate marketing company in Multan. We ensure that you invest in one of the best housing projects to generate crazy returns and get living luxuries.

So, contact our team and get the best suggestions for your real estate problems.

Disclaimer

We do not deal in any unapproved society of Multan. The information provided in this blog is collected from different online sources to provide details about real estate.