- Govt must provide financial assistance and relief to promote property construction and ownership
Conversation with Mr. Moeid Chohan — Sales Director, Moimin Estate and Marketing
Profile:
Moeid Chohan is sales director Moimin Estate and Marketing. He is a seasoned real estate consultant with a career spanning around a decade. With a passion for the dynamic world of real estate, he has made significant strides in the industry. His professional journey has been enhanced by his status as an ACMA (Associate Chartered Management Accountant) finalist from ICMAP, which provides him with a unique blend of financial acumen and real estate expertise.
His work primarily revolves around the vibrant real estate landscape of Karachi, with a particular focus on prestigious areas such as DHA Karachi, Clifton Karachi, KDA schemes ,PECHS, Port Qasim, and other relevant neighbourhoods according to client need. He has had the privilege of serving a diverse clientele, which includes multinational companies, professionals, business people, and foreigners. This wide-ranging experience has allowed him to understand the varied needs and expectations of his clients.
He specialises in residential, commercial, and industrial properties. This comprehensive approach enables him to cater to a wide spectrum of client demands, from helping families find their dream homes to assisting businesses in securing ideal locations and aiding investors in acquiring valuable industrial assets. He believes in building lasting relationships with his clients and ensuring their satisfaction with every transaction. By staying well-connected in the industry and keeping a pulse on market trends, and this help clients to get informed decision.Â
Pakistan & Gulf Economist had a conversation with Mr. Moeid Chohan about the real estate sector. Following are the excerpts of the conversation:
It is evident that the dynamics of the market are heavily influenced by a combination of factors. The trend I’ve observed is that investors, both domestic and international, are not as active in buying properties compared to end-users. Several key elements shape this phenomenon, and these include government policies, political conditions, and the genuine need for real estate:
Government policies:
The real estate market in Pakistan is highly sensitive to government policies. Over the years, various governments have implemented measures that can either stimulate or dampen the real estate sector. For example, tax incentives, ease of doing business, and policies that encourage foreign investment can drive investor activity. Conversely, increased property taxes or regulatory hurdles can discourage investors from entering the market.
Political conditions: Pakistan’s political stability or instability can significantly impact the real estate sector. Investors often seek stability and predictability, and political unrest or uncertainty can deter them. On the other hand, periods of political stability and favourable government policies can attract more investment in the real estate sector.
Economic conditions:
The economic health of the country and the purchasing power of the population are crucial in determining the demand for real estate. If the economy is thriving and people have disposable income, it often leads to more end-users buying properties for personal use, such as housing or commercial spaces.
Need-based purchases:
End-users often purchase properties to meet their genuine needs, be it residential or commercial. This need-based buying is a more stable driver of the real estate market as compared to speculative or investment-driven purchasing. Families looking for homes or businesses seeking to establish a presence tend to remain constant regardless of external conditions.
Local factors:
Local factors, such as infrastructure development, population growth, and the attractiveness of specific regions, play a significant role. Areas with better infrastructure and growth prospects tend to see more interest from both investors and end-users. The real estate business in Pakistan is indeed shaped by a complex interplay of factors, and the distinction between investors and end-users in the market is clear. Investors are more likely to enter the market when conditions are favourable, while end-users tend to make purchases based on their immediate needs. It’s crucial for the government to implement policies that provide stability and encourage investment, while economic growth and political stability are vital for sustaining the real estate market.
The introduction of the new tax has significantly complicated property sales in Pakistan. Sellers now need to obtain a certificate from the Commissioner’s office FBR, demonstrating the property’s fair market value and paying associated extra taxes after they can sell. This represents a major departure from previous practices, where no such certificate was required. The new tax has added financial and administrative burdens, potentially discouraging property sellers and causing transaction delays. Policymakers must strike a balance between tax compliance and ensuring a smoother process for property sellers.
In Pakistan, the real estate sector has been experiencing a slowdown in transactions, primarily attributed to the implementation of new tax regulations. These recent tax measures have introduced additional financial burdens on property transactions, making it more challenging for buyers and sellers to participate actively in the real estate market. The complex tax structure has deterred many potential investors, leading to a decrease in property deals and a general sense of caution within the industry.
The impact of these new taxes in the real estate sector is significant, causing delays in property sales and purchases. As a result, the real estate market is currently grappling with decreased activity, extended transaction periods, and uncertainty. The challenge lies in finding a balance between tax revenue generations and ensuring a healthy and vibrant real estate industry that contributes to economic growth and job creation. Striking this balance is crucial for revitalising the real estate sector and facilitating smoother transactions in Pakistan’s property market
Foreign investment in Pakistan’s real estate sector is subject to several critical factors. The government’s policies and regulations play a pivotal role in shaping foreign investors’ decisions. Policies that offer tax benefits and eased restrictions, especially in Special Economic Zones (SEZs), can attract foreign capital. Infrastructure development is another key consideration. Regions with improved infrastructure, such as efficient transportation networks, airports, and ports, tend to be more appealing to foreign investors as they enhance accessibility and logistics.
Political stability and security are paramount in instilling confidence in foreign investors. A stable political environment and adequate security measures are essential to encourage overseas investment in the real estate market. In Pakistan, last three years political instability cause decline in foreign investment in this sector as people want to invest in safe zone. In addition to these factors, economic growth prospects, market dynamics, legal frameworks, currency exchange, and cultural understanding all play roles in shaping the attractiveness of Pakistan’s real estate sector to foreign investors. Careful evaluation of these elements is crucial for making informed investment decisions.
The real estate market, to me, is not just a collection of properties; it serves as a vital barometer for the overall health of the economy. It reflects economic stability and growth. When real estate is booming, it often signifies a robust economy, with increased investments, job opportunities, and consumer confidence. On the flip side, a sluggish real estate market can indicate economic challenges. As a real estate consultant, I keep a close eye on these economic indicators, recognising that my work is intricately connected to the broader financial landscape.
High construction cost
Over the past two years, the construction cost in Pakistan has surged significantly, nearly doubling in what has become a pressing concern for both the industry and property buyers. This soaring cost has triggered a ripple effect, causing delays in project completions, extensions of promised delivery dates, and even putting some new projects on indefinite hold.
The primary driver of this issue has been the substantial increase in the prices of essential construction materials. Steel prices, for instance, have risen from approximately Rs115,000 to 125,000 per tonne two years ago to a staggering Rs250,000 to 275,000 per tonne today.
Cement, another cornerstone of construction, has witnessed a price hike of 70 to 80 per cent, marking a challenge of unprecedented proportions. As a result, many property deals have been canceled or placed on hold due to these staggering cost increments. There’s hope as construction material prices stabilize. The market is adapting to new costs, offering relief to construction and real estate. Challenges persist, like strategic planning, but there’s optimism for industry adaptation. This promises a more sustainable, affordable future for builders and property buyers in Pakistan.
I believe the government should provide financial assistance and relief to promote property construction and ownership. A thriving real estate sector doesn’t just benefit itself; it has a positive domino effect on the entire economy and job market. By facilitating home building and property investments, the government can boost economic growth and create job opportunities. This, in the end, leads to enhanced financial security and overall prosperity for the nation.