The property sector has always managed to capture the interest of many in Pakistan. However, working with it is not a simple story of just buying a plot or home and selling it at a higher price. To be a success at the trade and earn handsome rewards, you need to know the basics of real estate investment in Pakistan. These involve numerous intelligent considerations and financial know-how.
Here is a simple guide on how to invest in real estate in Pakistan and best utilise your capital for maximum returns.
Real Estate Investment in Pakistan
First of all, you should know that there is no exact way to define property investment. However, the process boils down to the sale, purchase, or lease of property for the sake of capital gains.
There are various types of real estate investments, but here is a list of those ones more applicable to Pakistan property market:
- Buying Files
- Buying plots for resale at a higher value
- Buying a property to rent out
- Buying open land in anticipation of development
Let’s further discuss the basics of real estate investment in Pakistan.
A file is basically a future plot in a society without any allocation or possession. These documents are issued before the development of a locality and are a favourite among long-term investors. Once a file is officially linked with a developed plot, its rates go up significantly. It means that the return on investment at this stage can be quite high.
A file, as such, can be your answer to how to invest in real estate with little money, should you choose to buy it early.
To make sure you don’t get confused between buying files and buying a plot, take a look at the key differences between a plots file and a plot.
Buying Plots for Resale at Higher Values
This is one of the most common types of investment activities pursued in the real estate sector of Pakistan.
Basically, it involves investors buying plots and holding on to them until their prices go up; over time and with further project development. This venture, overall, can be quite lucrative. And in following through with it, you’ll never need to respond to the ‘why invest in real estate?’ query. Your profits will speak for themselves!
Buying Property to Rent Out
Buying a house, apartment, or commercial property and leasing it out is an ‘income-generating’ type of property investment. You remain the owner of the property and get a constant return on investment through rental income.
You can take a look at our comprehensive guide on how to rent out your house for more clarification.
Buying Open Land in Anticipation of Development
This is one of the less common and riskier types of real estate investment in Pakistan. It involves buying open and undeveloped land that is not owned by any society. Investors who go for this approach anticipate that a developer will buy the land from them at higher rates to establish a project.
Currently, buying open land is an ongoing trend in the various mouzas of Gwadar, which are being developed under the China-Pakistan Economic Corridor (CPEC) initiative.
What Are The Pros And Cons Of Property Investment?
Fixing money in the property market is not everyone’s cup of tea. There are both pros and cons of property investment to consider. So, you need to take careful note of them before making your foray into the field.
This breakdown should help you out.
|Pros: Why invest in real estate?||Cons (depending on your investment appetite)|
|Potential for high returns in a short time||Prices may not go up as soon as expected|
|A solid asset in your possession||Possessing property involves paying property taxes|
|A steady source of income, if rented out||Real estate cannot be liquidated urgently|
|Can be held for future personal use||Property value may fall due to certain situations|
|A good asset to pass over to your kin||Legal issues or fraudulent practices may occur|
How Should You Go About It?
As a beginner in the world of real estate investment, you may be worried about not having in-depth knowledge about real estate investment in Pakistan. However, that is nothing to worry about. There are only a few simple steps that are required for any successful investment pursuit in the Pakistan property market. Once you learn them, you’ll be well on your way to striking some real estate gold!
Consider the following points:
Determine Your Requirements
First of all, think thoroughly about your investment goals
You need to determine your holding power, i.e., the amount of time you are willing to hold on to your purchase before putting it up for sale. Also, confirm what your exact budget is so that you can conduct your market research accordingly. Additionally, you need to decide whether you wish to invest in the city of your residence or someplace else.
Do Your Research
Once you’ve determined what your requirements are, do your research by checking property options that fit your needs. Utilise a wide range of resources for this purpose. For the property market in Pakistan, browsing through Zameen.com, the top property portal in the country, can give you a very good idea about the best projects for you to invest in.
Furthermore, ensure that any project you’re interested in comes with all the relevant regulatory approvals. You can check with the development authority of the area you are interested in to confirm this.
It is also a good idea to talk to a few agents about the price and demand trends in your chosen area. This information will give you an idea about how much appreciation in property value (price) you can expect. With extensive research, you may also be able to determine your own how-to-invest-in-real-estate-with-little-money code.
Buy Your Property
Once the preliminary research is done and you have narrowed down your options for real estate investment in Pakistan, it is time to purchase your property. Keep all legal considerations in mind and get the relevant transfer and sales deeds checked by a lawyer.
Moreover, consider the location and stage of development of your plot or home. These factors have a major impact on how soon the rates of your property go up. Always buy property approved by the relevant government authorities, so that you don’t lose out on your investment in the case of any legal issues.
If you are a beginner in the property market, this guide on how to buy a house for the first time will definitely help you out.
Wait for the Appropriate Time Period or Find a Reliable Tenant
This is where it gets tricky because this is the stage that sets apart seasoned investors from property market newbies.
There are a number of factors that affect, or dictate, how long you should hold on to your property. These include market trends, the general political situation, the project’s state of development, project location, and the developer’s reputation. For example, projects in Defence House Authority are popular with both local and overseas investors due to their reputation for being reliable and quality development.
As for renting out your property for gaining a steady income, there are a number of considerations to keep in mind.
First and foremost, there needs to be a written and signed tenancy agreement between the two parties involved. This document should outline the span of the tenancy, the amount of rent and when it is to be paid, the rate at which the rent will increase over time, and the process of eviction in case you want your property for your own use.
The eviction clause should also include what actions would construe immediate eviction. Register this agreement with your local law enforcement authorities, so that you are not liable for any illegal activities by your tenant. In fact, the authorities will ensure that the eviction takes place (should any disagreements arise) – despite any possible resistance by the tenant.
Sell Your Property
This is where your investment in real estate in Pakistan becomes fruitful for you. Once you feel that your property has reached its peak value potential, it’s time to sell.
However, there are a few steps you need to follow to get the best rate and return on investment:
Do not rely on one resource
Do not rely on just agents or unverified portals to determine the rate of the property you wish to buy or sell. Go over the listings on Zameen.com for the property’s area to see the range of rates currently trending. In addition to that, contact a few agents to get the pulse of the market and see what rates they are offering.
Ascertain the value of your property
This step requires a bit of subterfuge. Call one or two agents and ask the rate for your desired property from a buyer’s perspective. Then, call one or two more agents to ask the rates from a seller’s perspective. The accurate market value will lie somewhere between the rates quoted, as buyer’s rates tend to be higher than seller’s rates.
Try to meet the other party face-to-face
Whether you’re a buyer or a seller, meeting the other party face to face can help to smoothen the process. You can also verify the ownership status and legal status of the property more accurately this way.
If you’re buying property, ensure that you cross-check the allotment or transfer letter with the owner’s NIC.
Go for token money in the preliminary stages
Once a deal is negotiated, token money will be given to the seller. This is a guarantee by the buyer that they will purchase this property, and binds both parties to the deal. Token money is usually a relatively small percentage of the property’s total value, and should ideally be between PKR 50,000 to PKR 100,000.
The token receipt should have the complete details of the property and should mention if there are any litigation issues.
Verify the allotment/transfer documents
Go to the society or authority’s office to verify the transfer and/or allotment letter document. This will confirm the status of the property you wish to buy. When you’re selling property, ensure that the transfer letter is issued to the buyer in their name.
Avoid payments in cash
Try to make your property transactions as easy to track as possible. Therefore, avoid buying and selling property on cash payments, as this could lead to incurring legal issues – especially with the ongoing regularisation of the real estate market.
Go for pay orders or cheques, and keep all tangible evidence with you (in a secure place). This measure will also protect you from any future liabilities.
Moreover, you can also check out how to sell property in Pakistan and its transfer procedure for a better understanding of the topic.
So, here was our guide on the property investment basics in Pakistan. For more information and a deeper look into the real estate market of Pakistan, check out some tips on how to sell your house or plot for the highest value. If you are planning on investing in real estate in Pakistan, you must also take a look at property fees applicable to real estate investments.
Meanwhile, if you’re looking to buy a property but don’t know where to start, make sure to take a look at our detailed Area Guides for Lahore, Islamabad and Karachi. It’ll definitely help you narrow down your choices.
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