Best time to earn in Rupee...But what about Real Estate?!

Property Updates Real Estate Trends
#1

We often talk about the impact of devaluation of rupee on property. Normally, it results in increased purchasing power of people earning overseas and those receiving remittances (genuine or fake), thereby increasing demand and eventually prices of real estate.

However these days, and as had been predicted a couple of months ago on this very forum, we have entered a very rare era in our economic history. The Pakistani rupee is appreciating against the dollar! In just the last 6 months, rupee has gained from 112 to 104 against the dollar on the back of some very strong actions taken by the finance minister. Informed sources have told me that the FM has set Rs 100 as the target till july 2014, which now seems quite possible. For the first time, those people earning in Pak rupees are seeing their international purchasing power increase while overseas investors (with interest in Pakistan) will lose purchasing power unless they convert to rupees or invest in rupee denominated assets!!

With the biting IMF program set to ease out after september 2014, it seems rupee strength will remain intact for some time atleast.

So now with the reversal in fortunes for the pak rupee, what do the learned forum members think will be the impact on real estate? Is it a positive development or a negative one for property?

#2

It will be a positive development for genuine buyers !

In the real estate there must be a pool of genuine buyers apart from investors who holds their investment and go for construction or they wanna leave their investments atleast for a period of 3-5 years.

By the way Amjad sb investment oppurtunities ONLY in real estate is not a good sign of economic growth.

What are ur thoughts on this ?

#3

@ IS base…Sir agreed…Because real estate business not contributes very much towards economic growth…Other businesses have to be revived to make our economy strong.

#4

Stangnant in the short term. If rupee stays strong inshaAllah, then the next 6 months will show the pure strength or weakness of the real estate sector for investment.

#5

Rupee appreciating against dollar will definitely impact positive signs as the ones having their foreign reserves will be more concerned and go for any other investment opportunities available. Which fortunately is REAL ESTATE currently the only safe side.

But again i will say ONLY safe opportunity is somewhat unfortunate for economic growth.

Cheers,

#6

If rupee gets stronger prices of all commodities fall same will be the case with real estate. …development cost etc reduces…This is good for genuine buyer and common man. …

#7

I agree, the real estate sector (plots) is essentially a "non-productive" part of the economy and is normally not even taken into consideration when calculating the GDP, although construction is a highly productive part of both the real estate and economy, and also has a significant impact in terms of job creation. The present govt. Is quite fond of undertaking large scale infrastructure/construction projects which will have a positive impact in the medium term.

So far the only area which had been doing well in the country overall was the stock market, but with the granting of GSP plus status, Textile is also bouncing back and I am aware that many Chinese investors are trying to buy sick textile units in Pakistan to take advantage of the concessions.

However, coming back to the Rupee, an investor looking to buy Pakistani property in dollars now requires more dollars for the same price in Rupees. On the other hand, a foreign investor who sells local property gets more dollars for the same price. Logically, the Rupee appreciation should lower prices, all else remaining equal. But if the Real estate sector sees increased inflows from investors who had so far been keeping their money in forex (e.g. Exporters, NRPs), the result could be the opposite i.e. Increase in demand & prices.

So for a foreign investor, the time is just about right to invest in Pakistan. The question is, will real estate be on their shopping list? If it is, the issue of excess supply of plots may get resolved in the local market and possession plots might start to gain, especially in brand name housing schemes. Although on the contrary, with increased purchasing power, some Pakistani investors might also decide to invest overseas. I think the situation is very fluid right now but the next 3 months will be very important, in my opinion.

I agree with Pk1's assessment that in the short term there will be stagnation. Long term impact, I am not sure. Any other point of view will be welcomed.

#8

Appreciated rupee value in medium to long term (1-2 years) may have both ways effect on real estate depending. Multiple dimensions need to be considered and in the end it all depends on how well govt manipulates this situtation.

Real estate may grow due to;

1- prices of construction commodities (cement, machinery and such) may come down, encouraging developers to capitalize the limited time opportunity and start delivering projects

2- ppl may start converting their dollars to rupee for real estate investment activities may pace up, being most safe alternative. Big brands may be direct beneficiaries.

The situation may also negatively impact real estate as;

1- prices of certain items like automobiles, fuel, etc. May come down and ppl might start spending there

2- banks may bring in new bank finance schemes to capitalize on savings.

3- govt may bring in new saving schemes to get hold of ppl savings due to the situtation ( I don't expect it from pmln govt).

4- overseas pakistani investors may be stop putting money in Pakistani real estate market and look for something in other countries.

All these latter factors may result in reduced activity in real estate forcing prices to remain same for some time.

#9

Some strong fundamentals:

Export bills have been paid to the government while the exports have risen by 18% only during the month of February. Our GDP during the first half of the current fiscal year has almost doubled and the Chinese promise to invest $30 billion during the next 5 years has boosted the market sentiments. Besides, the Stock Market has been performing brilliantly for the last several months. Though our media hardly ever highlights the good things, but all these points were highlighted more than it is generally done. GSP Plus status by the EU has boasted the investors’ trust and there is positive rating by IMF as well.

Pakistan is expected to receive approximately $1.1 billion as a result of the auctions for 3G and 4G telecom licences this year. Similarly, the country expects to receive loans of about $1 billion and $500 million from the World Bank and the Asian Development Bank, respectively, before the end of the fiscal year.

Most of us believe that IMF is anti-Pakistan. That may have been the popular narrative but the fact is that IMF helps all the developing countries and a positive rating by them means that we are on the right path.

So when I see people commenting here that this progress is not backed by strong fundamentals, I really feel strange.

What more now ???

Cheers,

#10

… Foreign direct investment.

#11

… Balance of trade.

#12

FDI True that,

Foreign direct investment (FDI) in July-January totaled $523 million with inflows of $106.9 million in January alone..

last weeks appreciation was due to Saudi Arabias contribution for PAK development fund of $750million which is likely going to $1.5bn which gonna create temporary excess supply leading Pak Rupee gaining strength.

Can this strength be hold for sometime long ??

Be ready for the dollar to drop at 97 till June.

#13

Check today's rate dollar is already drop to at 97rs

i'm worried about sh.rasheed

#14

Foreign Investment always plays real affect in real estate, currency, stock and gold market. All the inflow are never be invested in only 1- or 2 investment options it always be invested these or any other investment options. If rupee get stable than those who want to invest in currency will definitely look other avenues. Stock market is already performing wonderfully well but as this is very risky business and at current rate most of the shares are not attractive. Same story with gold as dollars go down gold is also going down.

Now as real estate is already in correction phase and in few areas already down by more than 25% this is good time to invest in real estate. I personally think that in coming months if state bank reduce interest rate 1-2 bases point there will be very healthy activity in construction of new houses which will boost economy further.

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