Karachi :Real estate performance in 2011

[Salman]

Real estate performance in 2011

KARACHI: The real estate and construction sector strives on sentiments and 2011 was another disastrous year for builders and developers as the nation failed to curb its security issues, experts related to the industry informed The News.

They also said that concerns such as low gas supply (which compelled the government to stop fresh gas connections to new high-rise buildings), energy crisis, rising cost of input such as cement and iron and the imposition of sales tax under the Sindh Sales Tax on Services Act 2011 impacted the real estate sector adversely.

Federation of Pakistan Chambers of Commerce and Industry Standing Committee on Real Estate Chairman Munir Sultan said that 2011 had been another dismal year for the industry when both local and foreign investments remained at bay.

Comparing over the previous years, he said, in 2009 the representation of the construction sector had been more than 28 percent in the gross domestic product, which in 2010/11 crashed down to a mere four percent.

Uncertainty, land grabbing and political turmoil had been the main causes for the real estate sector’s nosedive, he said.

“All over the world, port cities have the most expensive housing rates, whereas in Pakistan, Lahore happens to be more expensive than Karachi,” he said.

Referring to the house financing and the performance of House Building Finance Corporation (HBFC) in Pakistan, Sultan said that both had been dismal in 2011 as the financing institution had itself remained troubled with fund issues.

However, the Association of Builders and Developers (ABAD) of Pakistan former chairman said that though 2011 had not been generally good for the real estate sector, it had seen investments in single-storey and one unit bungalows, which had been resounding successes.

Four to five big projects had been launched in the country, which was all successes, example the Naya Nazimabad project, he said, adding that a greater number of smaller projects had also been launched.

“Projects were launched where there was a demand for housing,” he said. Most of the projects had been launched in the urban cities of Pakistan, namely, Karachi, Lahore, Islamabad and Dera Ghazi Khan etc, he added.

Another prominent builder who wished to remain anonymous said that 2011 had also seen a rise in the ‘Bhatta’ mafia (extortionists) and builders had to deal with the rising “bribe rates” and land grabbers.

“It’s a misperception that builders and developers have powerful backups and they remain unharmed by elements such as encroachers and land grabbers,” he said. Karachi had the worst cases of land mafia, he added.

When the experts were asked how they perceive 2012 to be for the construction industry, most said that builders and developers are playing a wait and watch game and taking cautious steps at the moment since 2012 will be an election year.

“We don’t know as yet what will happen in 2012 and how the year will go by. The real estate sector involves millions of rupees worth of investments and any decisions made will be much thought over,” said Sultan.

However, the former chairman of ABAD said that the housing projects will continue to be introduced in the country as the demand for them is very high.

According to a World Bank report, the backlog for housing units was eight million in 2008, which jumped several-fold since then.

According to ABAD Vice Chairman Arif Siddik, the annual demand for housing is 600,000 to 700,000 units, while only 300,000 to 400,000 units are being built. This means that the demand remains unfulfilled by at least 300,000 units every year, which adds onto the already existing backlog of the country, he said.