By Faryal Najeeb
KARACHI: The local real estate market remains untouched by the global recession, which shows no sign of easing and in fact has further threatened the world economy, because Pakistan does not practice house-building loans.
An expert in the housing and construction industry commented that the whole world, especially the west and UAE, was badly affected after the real estate sector collapsed.
KK Builders Chairman Munir Sultan said every fourth house in the west was at default mainly because banks had failed to secure loans and customers had failed to pay debts.
“However in Pakistan, loans are granted only for house purchase or renovation of houses and then again they are secured and guaranteed,” he added.
“The House Building Finance Corporation (HBFC) grants loans only to buy a project that has already been made. Where will a borrower go if the house is already standing and it can be auctioned off in case a customer turns into a defaulter?” he points out.
Sultan also stated the real estate meltdown had taken place in the west and the UAE as projects were being made purely on investment basis due to which there had been more of supply than demand. “In Pakistan, we already have a backlog of 8.8 million houses at the lower and middle income level, so if housing projects are introduced here, then usually there is a tremendous response to them too,” he enunciated.
He said: “Despite the fact that we bristle with the highest interest rates and lending rates, the shortage of houses always create a healthy demand in the market.”
He expatiated on the country had in some ways actually benefited from the global recession as the downfall in UAE markets had helped local investors and builders to return to the Pakistani market.
Yet, Sultan is cautious about the future of the local real estate market as “the government was making no attempts to cash in on the available opportunities and continued to ignore the gold mine they have.”
He said a housing policy had been made in 2001 but any implementation had not yet been made and neither had the policy been changed according to changing times. He said the government could aid to uplift the real estate sector but appeared to remain uninterested.
On the other hand, Head of Research at Pak real estate, Shahbaz Mukhtar said the real estate sector had slightly been affected by the recession.
He said developed residential areas had witnessed a minor change of up to 10 per cent whereas the developing areas had been affected by 15-20 per cent.
He stated: “This is rather insignificant for the real estate sector but nevertheless an adverse figure.”
He explained that the recession had led to prices remaining either stagnant or reducing as demand for properties also dipped. He voiced that many overseas Pakistanis had been affected by the recession and they had also not invested into the country.
Mukhtar said overall the country had also been hit by the recession which led to people either losing jobs or their spending power being limited and this consequently led to their taking out less money for property purchasing, thereby adversely influencing property prices.
The News, 30-Jan-09