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5 Major Reasons Behind the Drop in Real Estate Prices in Pakistan

Traditionally, the real estate sector was seen as a go-to spot for parking undisclosed funds, a trend that also held true in Pakistan not too long ago. However, a positive shift occurred with the introduction of new real estate laws in the 2016–2017 budget. These new laws increased property transaction taxes, revised property rates besides effectively halting the deposition of hidden assets into the real estate sector. 

Pakistan’s real estate market has played a significant role in the country’s socioeconomic development, consistently contributing over 9 percent to the GDP, as reported by the State Bank of Pakistan. Despite its historical importance, the real estate sector is currently crashing. There are numerous reasons behind it but in this blog, let’s delve into 5 major reasons behind the recent property price decline in Pakistan.

1 . High-Interest Rates

Interest rates play a critical role in property prices. High-interest rates serve as a signal for people to sell properties and deposit money in banks for greater returns. However, lower interest rates always increase property demand, causing prices to rise. Hence, the first and utmost reason for significant decline in property prices in Pakistan is the high-rates interest

2 . “Zero-Tolerance” Against Hoarded Money

Another primary factor contributing to the recent price dip is the strict crackdown on undisclosed funds. The government’s “zero-tolerance” policy towards unstated wealth has led to inquiries about the source of income for those who purchased properties with such funds. Fear of being caught has resulted in a lower investment rate in the real estate sector, causing property prices to decline further. 

3 . Non-Filer Property Buying Restrictions

Strict restrictions imposed on property acquisition for non-filers, along with additional requirements for overseas Pakistanis, have further led to a downturn in the luxury property market. Because of the limited number of filer buyers, it has become challenging to find interested parties, resulting in a nationwide decline in property prices.

4 . Crackdown on Illegal Housing Schemes

The National Accountability Bureau’s (NAB) crackdown on illegal housing societies has also contributed to the property price decline. The government’s efforts to demolish illegal constructions and shut down such schemes have instilled fear among potential investors. This has led to a decreased rate of investment in the real estate sector, consequently causing property prices to drop significantly.

5 . Impact of Naya Pakistan Housing Scheme 

Established on January 15, 2020, by Parliament of Pakistan, the Naya Pakistan Housing & Development Authority (NAPHDA) is tasked with planning, developing, constructing, and managing real estate development schemes and projects all over the country to provide the public with houses at considerably affordable prices to cope with housing crisis. Despite being a great initiative for the public, it has diverted interest from private housing schemes and real estate projects. The resulting reduction in investments has contributed to the overall decline in real estate prices across the country.

Conclusion

The landscape of Pakistan’s real estate sector has undergone notable changes with the implementation of new rules and policies. The era of parking undisclosed funds in real estate is over, creating a transparent and fair environment. Moreover, the real estate market is shifting towards stability, with property prices adjusting gradually and steadily. This sets the stage for a promising business landscape, ensuring that every taxpayer has a chance to own a home in Pakistan. The future of real estate in the country looks bright and full of opportunities.

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