I had been thinking about asking this question here for some time now but decided to first gather some data. I have observed that in most areas, specially upscale private housing societies, the ratio of prices between a 10 marla plot and a 1 kanal plot is normally 1:1.6 on average i.e. 1 kanal plots are about 60% more expensive than 10 marla plots. Exceptions may be there due to the location attributes of an individual plot.
However, in bahria enclave, I have noticed that the difference is almost 100% across the board, meaning that 1 kanal plots are normally twice the price of 10 marla within the same area. This seems true even for non-possession blocks and it seems a little unusual to me.
So what do fellow members think about this situation. Is this differential justified and if yes, how, or is this a case of market mispricing which can somehow be exploited gainfully? Thanks.
Smaller plots attract more buyers due to purchase power, whereas, the larger plots can be afforded by few. In Bahria, it is not the full price of plot that matters, because trading is mostly done on files which are only fraction of full price.
I support @ISLOO as this is true mostly the buyers have purchasing power to the little plots like 5 marla in this case @Kashif Sheik price of 1 kanal must be the quarter of its price to 5 marla but in real it is not possible in any area. In-fact 5 marla plots are far more expensive in comparison to 1 kanal plot. Sellers do know the market and they know there are more buyers of small plots.
For instance price of 5 marla plot in johar town is 6.5 millions, 10 marla will cost you 11 Millions & 1 kanal will cost you 17 Millions, these are the exact figures at present.
I agree with Kashif's analysis. I have been using this technique since some time to find overpriced and under-priced plot categories and mentioned it on the forum a few times as well. My findings were a multiple of 1.65X for the next category.
The only fair market sense in this misspricing is that unlike other developers Bahria's larger size plots are too few in numbers which drives their value out of multiple. To confer with Isloo and Fahad, 5 marla plots are more reachable thus driving their prices high relative to 10 Marla but not relative to 1 Kanal.
The conclusion is that in the long-long-run larger and smaller plots are winners in Bahria while 10 marla catches up slow in relation to others unless its supply is short depending upon the project (like in BTK).
In CDA sectors, smaller plots are expensive if we divide it on per sq ft basis.
@Isloo, Fahad: I think the question is misunderstood. What he said is that becoz per marla rate are more for smaller plots, so price of 10 marla plot cannot be double of 5 marla and 1 kanal cannot be double of 10 marla. So if 5 marla cost is 10 lakhs, price of 10 marla will not be 20 lakhs but maybe 15-16 lakhs. And if 10 marla cost is 15 lakhs, 1 kanal price will not be 30 lakhs but maybe 25-26 lakhs.
I just checked the prices online and his observation looks correct. In enclave prices are really double. For example average market price for original booking plots these days are:
5 marla: 25-27 lakhs
10 marla: 50-54 lakhs
1 kanal: 1-1.25 crore
It is obviously not normal acccording to overall market at other places, including CDA sectors. Why is it like that in enclave, I don't know, but it is interesting to find out.
Thank you ZG for that clarification. That is exactly what I meant. Haven’t yet seen any explanation though from any of the members and in fact everyone seems to agree with my analysis that this pricing is unusual! But the question is why?! Why is the market not correcting this anomaly if it is indeed one? Or is there something that we don’t know? I am quite sure this is definitely not a demand/ supply issue.
In bahria enclave sector C-1 with 1 kanal plot have got thier possesion or near to get possesion while 10 marla plots will take more time … Thats is why thier is the difference
Kashif, I think one reason has been explained by Zubair i.e. Availability of certain type of plots 5 marla, 10 marla and 1 knanal etc. In a particular society.
Bahria might be the culprit :-). They might have set the prices the same as you are saying. But as far as I know that booking price of 1 kanal in C1 is 1.20 and 10 Marla 65 which seems to be ok. If we double price of 10 Marla, it becomes 1.30.
ZG and Kashif, Another reason… It has to do with the demand of larger plots and affordability of buyers. I mean, when an Islamabadi can buy 1 kanal in BE for the same price as 8 marla in CDA sector, then why would he settle on 10 or 5 marla.
I think what is more important than finding out why it is like that is to know what can we investors do in this situation to make a profit if this really is mispricing. Is it the 5 marla which is under priced or the 10 marla and 1 kanal which is over priced (for any reason)?
I think all points mentioned are fair, but the basic argument remains that what is so unique to Bahria Enclave that this differential seems almost universally true across the scheme but you don't see its manifestation elsewhere in other housing schemes, be it Gulberg, DHA, JKCHS or even Bahria Town Rawalpindi. Is it because bigger sized plots are in higher demand and people who could afford the 5 & 8 marla plots (and are presumably more in number) are not interested in enclave?
@Awais. Unless we know why this is the case, we will never find that out either. My personal analysis is that it is the 10 marla and kanal plots which are slightly overpriced. I am just saying that based on comparison of prices with "similar stage" plots in Gulberg and DHA, but I could be wrong about this.
@B.R.Malik. Sir I think your answer is very close to my analysis also, this difference, even though quite unusual and seemingly unrealistic, is being "maintained/ managed". I just don't see any other explanation. Market players are too sharp not to have spotted this gap/ opportunity, but amazingly, whether prices rise or fall, the differential is being sustained.
In DHA Lahore phases 5 & 6 this double the price thing holds true as well for 10 marla and 1 kanal plots. Is it possible that DHA will be gaming the prices? I doubt that. Its about market supply and demand and risk/return utility of people. People who have money will pay any amount for a place/location they like and those who have slightly less will strive their best to live closer to the first kind. I am sure even in BE 10 marla prices will catch up to 1 kanal prices (1.6X) which will catch up to CDA’s park enclave price of 1 kanal (1X).
I think that BE was launched against the CDA's Park Enclave in Half price, where most of the plots are sized 1 & 2 Kanal, so they priced 1 Kanal as 60 Laks that time and kept the smaller size plot prices accordingly half of the bigger size plot:
1 Kanal = 60 Lak
10 Marla = 30 Lak
8 Marla = 22 Lak
5 Marla = 15.85 lak
so it's bahria who started this pricing and now people are calculating their profits accordingly and investors are selling in double price which is creating huge difference. But still bahria will keep the comparison of Kanal 2 Kanal plot with CDA's park enclave, now park enclave launched kanal plot for 175, if i'm not wrong, so BE prices are likely to go up sp. For bigger plots.
@Imran Khan. I think you have nailed it, these prices were set by Bahria and market is continuing with the trend. At the same time, it is also true that there is no need for the market to stick to these ratios. My opinion is that this thing is happening because for 1 kanal and 10 marla you already have possession plots, so their "real" value is known and file prices are zooming towards that target.
On the other hand, there are no possession plots in 5 marla and 8 marla category, so they still have to undergo a "price discovery" phase.
So my analysis is a little different from Kashif i.e. I think its the smaller plots which may be undervalued.
Park Enclave was launched by CDA on the dictate of Malik Riaz. He fixed the higher prices as work on BE started before PE. He set low prices to attract investors, which he successfully did now the prices will surpass PE which will remain incomplete for many more months till Malik doubles and triples his investment.
Park Enclave price was not very high at that time when it was launched considering it’s location and CDA’s brand name.
@Zahoor. Bahria Enclave prices are seeing a correction whereas Park Enclave prices have gone higher. 1 kanal plot in PE was selling for 3 million loss over a year ago, now it is in 3 million profit, which is likely to improve as development progresses.
@Imran Khan. I agree with your analysis, though I don't think it is reasonable to expect Bahria Enclave to catch up with CDA park enclave, if the development continues.
@Raza. I think this will remain an enigma for now, but I would like to add that prices of 5 marla plots seem to have settled at new low levels, whereas it is the price of 10 marla, which is seeing some downward correction. I have seen some ads recently where the Asking price for 10 marla is 48 lakhs. My assessment is it would settle around 45.