Value of properties in coming years

Buying Property Investors Advice
#1

Salam members,

I would like know the worth of properties in case of 5 million housing project gets completed. Please do assume that this project will get completed and please don't discuss that it's impossible to implement that project or not.

Also, second thing that i would like to know is in relation to south punjab province. Will the properties in lahore and cities in northern punjab reduce after the new province is formed? If yes, then to how much percentage?

Please avoid politics and possibilities of success of project etc. And do assume that what if it will happen.

Thanks.

#2

Nasir Sb.

It makes us nervous to comment while you are keeping a gun on us?

#3

I think the title should have been 'Impacts of NPHP on Pakistan/Pakistani Realestate'

Anyways,

1 Assumptions:

A. 5 million New Houses (literally a new Pakistan)
B. 5 Years
C. 5000000 x 6.8 = 34 million people get a roof on them
(avg. household size is 6.8 people/house in Pakistan [REF-1])

D. New/Existing = 5000000/19211738 = 26% increase of housing units to the existing inventory [REF-2]

2. Data & Facts:
A. Pakistan spends USD 5.2 billion on construction/ year
B. 2% of total GDP [REF-3]
C. USD X for land purchase (X because land cost has high variability compared to construction)

3. Implications on Society & Economy
Keeping all the assumptions in place that can be a historical revolution with 26% growth of units in just 5 years & 34 million people get a roof. Minimal USD 26 billion circulates in economy and minimum 2% of GDP secured for 5 years (Employment growth is a massive added benefit)

4. Ground Reality
However, politics cant be kept aside, at the end of the day this project's foundations are socio-political (Society & Politics is in the DNA of this project). The figure suggest that in next 20 years we can have more houses than we had in past 71 years.

--------------------------------------------------------
5. The Emergence & Growth of the Mortgaging Model in Pakistan
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To me, with all the assumptions and facts, most interesting part seem to be Government level initiative to invite the banking sector into the construction/housing model of business. There is house mortgage in Pakistan but almost like a dead-horse and never flourished as the Auto Financing in Pakistan.

As per my view, I am highly skeptical of the 5 million figure, however, even if 0.5 million units get materialized, as planned by the Government to introduce a refined house mortgaging model, considering the citizen's ease and comfort it will be a massive initiative. Why pay the landlord for your life time when you can pay the government/bank for approx 20 years to get a home for your family.

6. Religious perspective of Mortgaging in the context of Riba (interest/soud by banks)
I am no expert at all, I may be absolutely wrong but as per my little knowledge (referring to some scholars/domain experts) this does not qualify as being Riba or interest filled based on Usable vs Consumable product [REF-4] [REF-5]. I am happy to stand corrected on that.

7. Conclusion
To me, 5 million sounds good for our country & its impact on housing, society, economy etc. but much more interesting and dynamic would be to see how the project will be executed. Currently mortgaging is a highly neglected factor in Pakistan. Malik Riaz has bought a bank [REF-6] so he may be on the path of Mortgage-driven housing more aggressively, in nearer future. Customer buy from Bank and Bank buy from BT. In today's world and life the middle men are the mega winners in any transaction related activities (Careem/Uber, Amazon, Air BnB etc.)

Your second question:
"Also, second thing .... how much percentage?"

Sir no one knows (its not even an assumption, its a non-existent hypothesis, unless the exact or approximate locations for the project have been marked)


[REF-1] Pakistan Average Household Size https://www.arcgis.com/home/item.html?id=8aead66ab8894fa49dbf3f92e1adbfc3

[REF-2] Total Housing Units in Pakistan http://www.pbs.gov.pk/sites/default/files//tables/HOUSING%20UNITS%20BY%20NUMBER%20OF%20ROOMS%20AND%20TYPE.pdf

[REF-3] Real estate in Pakistan
https://en.wikipedia.org/wiki/Real_estate_in_Pakistan

[REF-4] Are Mortgages Islamically Permissible? | Shaykh Atabek Shukurov
https://www.youtube.com/watch?v=wtY-CeSHkSI&t=545s

[REF-5] Is taking loan and mortgage Haram | Javed Ahmad Ghamidi
https://www.youtube.com/watch?v=STawmMVP1L8

[REF-6] Bahria Town to acquire investment bank
https://www.dawn.com/news/1313321

#4

Great analysis Imtiaz. Also to mention is location, where will these houses be located. Property prices will remain at the same pace atleast in big towns and cities IMO.

#7

Ty Phoon,

I guess the site marking is yet to be started. As per the info

- Updates on Site Markings
"The application process for Naya Pakistan Housing Programme will be carried out till December 31, 2018. In the meanwhile, the task force has been formed to carry out the related research work and attend to concerned matters. Simultaneously, the search is also on to mark the appropriate sites for the homes in various cities."

https://www.zameen.com/blog/frequently-asked-questions-on-naya-pakistan-housing-programme.html

Most probably that will be the suburbs of the city lets say the likes of Chakri Road, Rawat, Towards Taxila, Fateh Jhang etc. (in case of RWP-ISB). Such parts of all big cities have lots of space available an have the potential o accommodate such projects.

- Impacts on Existing Real Estate
At the end of the day, Real estate is also purely influenced by the supply demand thing. Unless real supply has been balanced with ever growing population, real estate prices will keep increasing. As I mentioned, govt. initiative may big time promote mortgage-base financing with private player also start to join this. As the figure suggests, 26% addition in next 5 years (if achieved) is massive progress. Affordable housing is a big challenge even in countries like US that have more resources and space available so it may be managerialy more challenging than it sounds.

- Emerging Trends: Fabricated/Pre-built Units
It would be good to see any new trends like Fabricated house pre-built units. So far, for whatever reasons the concept could not get much liking in Pakistan. However, it can be speedy and quite cost effective...

#10

As new housing projects are cleverly aimed for lower earning and low middle income citizens (those do not normally compete for rather expensive houses), i doubt that it will effect the market of bigger projects or bigger houses in upscale locations. However similar sized houses in similar locations will definitely see a decline in returns and investments for minimum of next 5 years.

#12

It depends, how we define Market. Real-estate Market in general includes.

- Land Sell/Purchase
- Construction (Structure + Interior + Exterior)
- Rentals
- Lease etc. etc.

1. Construction costs/procedures in most cases remain same regardless of location (ignoring some extra procedure adopted by BT etc.). If and whenever materialized, some new trends can emerge, e.g., purchase through house mortgage, construction through fabrication etc.

2. Rentals will be affected as the project is mainly an attraction for the people paying monthly rents. People living in some phase of BT or some I-series sector will prefer their own house at a slightly distant location rather than pay heavy finances for renting in.

3. BT phases beyond 5 are still distant from mainstream cities but who thought a decade ago that at such distant locations big construction/population will take place that will take huge chunk out of the property of the main stream ISB (I and G series sector) or RWP (Satellite Town, Askari etc.).

Whenever the project materializes, I believe it will impact expensive/inexpensive properties somehow in terms of sale/purchase/rentals etc.

#13

Thanks for detailed replies Imtiaz! Can you also please shed some light regarding new province South Punjab and its impact on properties in North Punjab major cities? Thanks again.

#15

Thanks Nasir for initiating an interesting discussion. I like to and can only analyse based on available data. I prefer to engage in forum discussions that are For me only theoretical discussions can be based on pure personal experiences with vague interpretations. Data at-least objectively highlights things as they are. Anyways back to the discussion.


Hard to predict the future, unless some ground work is there. I do believe in a new province/sub-province out of Punjab, however, that was is mostly a political slogan. Whatever Govt. gets into power in Punjab will resists the idea. Last time the idea was floated back in 2013 but we are yet to see any progress


Again, lets assume (in a good faith) that in the next five years we have a south Punjab province then the direct impact of South Punjab (SP) real estate on North Punjab (NP) will be only if all administration moved to SP from NP. Population is growing and still for decades to come bigger cities like RWP/LHR/KHI and the Capital is expanding beyond their traditional boundaries so in any foreseeable future, I believe (I may be wrong only time can tell) that there will be no such impact.

Although, the value of real estate in SP can jump significantly with the new province and that somehow brings along the investment - lets see how that goes, if and whenever the concept gets materialized.

#16

Thank you imtiaz for your logical comments. I am new here. I have read some of your discussion. Your points are interesting because of facts based on data that you use and not rumors or personal bias. I have one question about what locations of islamabad can be part of this project?

#17

Rarely, I see posts answered in such articulated way as Imtiaz has done. No matter the health is of content, I applaud you for an articulated presentation. Good Job.

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