Of late, Pakistan's housing sector has been in the news for the wrong reasons, what with the devastation from last year's flash floods, followed by the massive earthquake this January.
However, the country's resilient real estate market, which was one of the relatively less affected sectors during the recent global slump, has gone beyond staying afloat. If the numbers are anything to go by, Pakistan's realty market is headed for a growth surge.
Besides investments from friendly nations such as Iran, huge amounts have streamed in from international investors in the UAE, Singapore, Malaysia and China, among other countries.
Commitments have already been made for $43 billion (about Dh160 billion) on two islands off Bin Qasim, near Karachi, and $68 billion on the New City Project in Hawksbay, Karachi, for infrastructure projects. Mega housing projects are also being developed in Lahore, Gwadar, Mangla and Islamabad.
Infrastructure projects in progress include a large number of flyovers, underpasses, highways, transportation systems, tunnels, dams, roads and industrial projects.
Government officials also revealed that German and Canadian construction companies are to invest $8 billion in the housing sector, under the Prime Minister's Housing for All Programme. Under the scheme, one million housing units for government employees and the general public are to be constructed across the country, at an affordable cost.
This large scale of construction is expected to see a widespread increase in socio-economic activity across the country. More than 100,000 housing units will be completed in Islamabad by the end of 2011, to overcome the shortage in the national capital.
Incidentally, the housing and construction sector is among those identified by the government as a key driver of economic growth. Federal Housing and Works Minister Rehmat Ullah Kakar has appreciated the investment of companies such as Emaar in the country's housing sector, and hopes it will set an example for more foreign investment in this industry.
So, why should an investor seriously consider Pakistan's real estate market? With a dearth of more than 800,000 housing units per year in Pakistan and a total combined production capacity of the public and private sector estimated at 350,000 units per year, there is a piling of around 450,000 housing units that add into the next year's backlog. Demand exists for both mass housing as well as quality offerings.
Investors interested in commercial projects will find this sector plagued by oversupply, increasing vacancy rates and major drops in prices and rental yields in Islamabad and Karachi.
Lahore is better off. Vacancy rates in Lahore and Karachi range between 40 and 50 per cent, while due to larger government presence, the metric for Islamabad is 10 per cent. Rental yields are expected to stabilise after the last quarter of 2011.
For lower-risk investments, the residential sector remains a favourite. In the last two years, prime city locations in Lahore, Karachi and Islamabad entered the pricing league of millions of dollars. For example, a one-kanal house (about 506 square metres) in areas such as Gulberg, Model Town, and the Defense Area are sold for $200,000 and $300,000, to even $500,000 for two kanals.
A word of caution though — a spate of scams saw the same plot of land or house being sold to multiple parties. The government is trying to curb these concerns however, by computerising ownership documents.