Real Estate Sector

Size and Impact of Real Estate Sector and Its Role For Business Cycles and Growth

More over 700,000 Pakistan real estate companies employ about 3.8 million people, accounting for 22 percent of all businesses and 10% of Pakistan workforce. In 2007, the real estate business generated 406 billion Euros in gross value added, accounting for 18.7% of Pakistan total gross value added. As a result, it is safe to claim that the real estate industry, second only to manufacturing, is one of the most important industrial sectors.

The value of real estate assets in Pakistan is projected to be around nine trillion euros, which is three times the country’s gross domestic product. Approximately half of all assets owned by individual families are real estate. The streamlining and modernization of the real estate and housing markets are advocated as medium to long-term solutions for developing a well-functioning real estate and housing market.

Property rights and titling systems rules, frozen property dispute resolution the creation of a system for collecting and disseminating real estate information, and the reform of encouragement of foreign direct investment, taxation to stimulate the selling of real estate. Real estate investment trusts (REITs), land subsidy reform, and the necessity for public-private partnerships in land development and housing provision are all issues that need to be addressed.

It comes as no surprise, given the minimal price volatility of real estate. Building investments have been largely consistent, with the exception of the historically unique period of Pakistan reunification, which was marked by unusually large investments. Between 1991 and 2001, the average housing investment outperformed the 1970–1988 period by 47 percent on average. Since 2002, investment activity in home construction has bottomed out again, but at a level that is roughly 31% higher than the 1970–1988 period. For the years 1970 to 1980, the average index value for nonresidential building investment was close to 90.

After peaking at 111 billion euros in 1996, the construction industry’s turnover fell to around 82 billion euros in 2009. The Pakistan labor market does not reflect these relatively stable improvements to its full extent. Rather, from a high of over 1.3 million jobs in 1996 to just over 700,000 jobs now, the construction industry has lost ground.

However, structural factors should be blamed, rather than economic cycle effects:

The displacement of foreign construction workers for domestic workers is one point worth highlighting here. Furthermore, labor-intensive house construction has lost ground to capital-intensive civil engineering. The building sector appears to be more productive statistically as a result of this. The people who have not enough money to buy home at high prices, can easily buy their dream house in Park View City Lahore because Park View City Lahore is offering 10 Marla House for Sale in Park View Multan Road Lahore at affordable price. Park View City located in Lahore which is 3 km away from Thowker Niaz Baig on Multan Road. Lahore Airport is just 20 km away from Park View City Lahore. Park View City Lahore provides all basic features that we need in our daily life.

Positive future impacts for Pakistan real estate could occur, according to certain market participants’ views, because the performance of a specific asset type, such as real estate, is also related to the (expected) performance of alternative investment possibilities.

Government bonds from countries with a high credit rating now only have moderate yields. And, based on historical precedence, some market participants have linked a country’s potentially rising sovereign debt (Standard and Poor’s 2010) to political decision makers’ motivations to encourage inflationary tendencies. 8 This will trigger another run on tangible assets, based on the belief – which has been confirmed to some extent for the United States9 – that real estate has an inflation-hedging impact.

Pakistan real estate industry is one of the country’s most important industries. Its growth, as well as the increase of real estate values, are critical to Pakistan’s economic business cycle and long-term growth path. Pakistan’s real estate price trend has been stagnant for at least a decade and a half, deviating from the global trend.

The demographic development, the features of the Pakistan real estate finance system, fiscal policy, and a decade of low and stable general inflation are among the underlying structural differences. In exchange, Pakistan’s real estate sector – especially when compared to other countries – acts as a stabilizing force during periods of poor economic conditions.

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