In the times of COVID-19 – Is now a good time to purchase and sell?
The world economy and stock market have shaken up due to the outbreak of COVID-19. But we in Pakistan, thanks to Prime Minister Construction relief package, are doing pretty well. However, other businesses are still struggling to save themselves from going default. The real estate market of Pakistan is performing well as compare to the international cities.
Why is that?
One of the significant reasons is when you purchase a property in Pakistan, you get full ownership, and the property is solely your own. Pakistan's real estate does not prefer to work on a mortgage or home loan. Even in the times of global and economic crisis, the property does not face downfall.
Whereas, in international cities, the banks are hugely involved, and the mortgage has to be paid every month. If there are any crises, just like COVID-19, than the bank has every right to move you out of your house and hand it over to someone else.
Real Estate Sector in Pakistan
Various property investors, property owners, genuine buyers, and landlords in Pakistan are in doubt and thinking:
- Will COVID-19 disturb the real estate market?
- The property pricing of residential plots are decreasing?
- Is now a good time to invest in under-developed areas?
- Will off-plan developments increase their value amid COVID-19?
With all these questions in mind, we will delineate relevant information as to why it is an excellent opportunity to purchase and sell real estate in Pakistan amid COVID-19.
The first half of COVID-19 in Pakistan was a complete lockdown from March to May, and all construction work was halted. In the second half, when the lockdown was eased on the construction sector. The movement slowly started to gain its speed, and today in June 2020, the constructions of many under-development projects are happening.
Investors in Pakistan and outside the country are searching ahead to invest their cash in the real estate market amid COVID-19 existence. It is mainly because of the Special Tax Incentive announced by Prime Minister Imran Khan in April 2020 for Construction Industry in Pakistan.
Many new developments are expected to initiate in the entire country. Various builders and developers have planned to invest billions in new construction projects. This offers a significant opportunity for investors within Pakistan and overseas investors. The real estate sector is wide open to welcome investors as the Federal Bureau of Revenue (FBR) will not investigate sources of income investing in the construction industry within this package.
Let’s tell you about the tax benefits an organization or a single person can achieve in this package.
The federal government has announced tax amendments, benefits, and exemptions under this particular tax incentive for the construction industry.
- Fixed Tax Regime will be applied to all major and minor developments and construction projects. The tax will impose on per square feet in case of buildings and per square yard inland advancement.
- All construction materials apart from Cement and Steels are excluded from withholding tax. In a similar context, all identical services are expelled from withholding tax.
- All builders and developers can collect profit income from their projects up to 10 times the tax paid. The additional credit earned has to pay extra tax.
- All low-cost housing units being constructed under the Naya Pakistan Housing Development Authority of the Ehsaas Program will receive a 90% waiver on the fixed tax.
- All tax exempted on financials paid to shareholders by the developers and builders looking for taxation in this scheme.
- Capital investment by investors or companies within this scheme will be excluded from Section 111 of the income tax ordinance. The FBR will not investigate the source of funds. Black money can be turned into white.
- One time privilege from Capital Gains Tax on the sale of personal property. However, the house size should not exceed more than 500 Sq. Yards and Apartment size do not cross 4000 Sq. Feet.
- Advance tax eased up to 5% on auction properties.
- Sales tax in the construction services reduced to zero.
- CVT (Capital Value Tax) on the buying of property is revoked.
These tax benefits are not limited to the construction and development firms but for investors who wish to purchase a plot for the purchase of building a house or commercial mall.
With these reliefs, a massive amount of black money will be turned into white by investing in real estate projects in the upcoming months. It is predicted to boost real estate property prices even with the existence of an epidemic and stimulate Pakistan's construction activities by producing jobs to millions of deserving employees.
Expert economist Shakil Anwar Kamal has explained it well, the future of Real Estate in Pakistan,
Pakistan Population 2020
As it is known that Pakistan has a population of 220.66 million in the year 2020 and has a genuine need of 12.5 million shortfall homes. The demand for housing is more than the supply rate at the moment. The builders and developers are considering to develop some cheap price residential projects under the Naya Pakistan Housing Project. These low-cost units have a considerable percentage of potential and genuine buyers and will be sold fast. The developers will be benefitted from saving 90% on the fixed tax.
How under-developed or Off-plan projects are behaving in post-COVID-19?
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The investment avenue in Pakistan due to COVID-19 is in a disastrous situation. The Pakistani government and IMF is expecting a negative of -1.6%. After COVID-19, negative growth is predicted, which will create unemployment, default business, and economic crises. All the companies will go in negative. The employment sector will be hugely affected, and the lack of new opportunities are sure to have. Despite all these odds, in the last two months, our economic analyst is observing a gradual increase in the investment avenues in Pakistan. The gold prices are strengthening, gold rates on 11th. June. 2020,
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Apart from the gold prices, the stock market has seen its bottom, and now it’s trading around 35,000 points the benchmark KSE-100 INDEX.
However, the real estate sector has not shown any price depreciation in this devastating situation. Instead, the property analyst has witnessed some increase in the prices in many areas of Pakistan.
There are some logical reasons behind the appreciation in the real estate sector.
- There is a genuine demand in the market due to the shortfall of houses.
- The interest rate is down from its tops 13.2% to 8% these days.
- People are pulling their money from the banks and investing in other avenues that are providing more return. Indeed, real estate is the sector with the maximum margins in the real estate avenue of Pakistan.
After the ease of lockdown, the construction sector is back on work by following SOPs issued by the government. Many people are searching for houses, shops, plots, and commercial investment options.
As we all know, Karachi's central city is congested. Therefore, more developments are taking place towards the Super Highway, where genuine buyers will find peace living, lower budget houses, all facilities provided, and appreciation in the property.
For property investors, these low-cost housing projects are appealing for rental income purposes or property investments. Both options can be availed. It is beneficial to invest in off-plan properties at the moment; you can benefit from the value appreciation with a withholding power of one year. In such times as COVID-19, rental properties are affected temporarily. Whereas investing in off-plan or under-develop properties can be proven vital in the upcoming future.
Let’s provide you with an excellent case study on how you can benefit from your off-plan property investment,
Case Study 1
Barkaat presidency A client visited REDBOX Estate with a budget of 12.5 Million and had a demand to purchase one 155 Sq. Yards villa.
The price of one Villa in Barkaat Presidency was 12.5 Million. In the initial stage, the project offered a 10% discount. Instead of buying one Villa, our property consultancy gives the investor the same amount in hand to book six villas to get the maximum benefits. See how it works for him:
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Now, as the discount has been waived off. The investor benefitted with a profit in today's market by selling off these six villas. And look at the benefits he gets. With the same cash in hand amount of One Villa, he made a saving of 50%. If you purchase off-plan property, you will still be able to enjoy profits through feasibility plans if you choose a good deal and a holding power of one year. Always discuss such options with your property consultants.
Commercial sector investors amid COVID-19
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The commercial sector in Pakistan is facing a severe loss. After the ease of lockdown, only a few business sectors are allowed to operate. If we talk about our Aviation industry, it is in severe decline, domestic flights with limited tickets are operating. As per the international flights, only necessary trips with government permission are working. The next is our marriage halls and relevant businesses to it. Since social gatherings are prohibited, the banquets and wedding halls are closed till uncharted times. Third, our educational centers are hugely impacted as all schools are closed, and digital education is supported. But there are many commercial sectors which are operating even in the time of COVID-19,
What are they?
- Hospitals and medical centers.
- Retail shops & Pharmaceutical shops.
- Shopping malls and Commercial shops.
What are we trying to prove?
If you invest in the right commercial sector, then your investment can benefit even in the most uncertain times, the demand has changed, but the market has increased as well.
Hospitals and Medical Centers
With the COVID-19 outbreak, hospitals are built around the world. What this shows us is that if you have purchased a commercial land, it can be utilized to see whether the conditions of a country are frequent or economic crises are happening. The need for commercial will always increase due to the ever-increasing population of Pakistan.
Retail Shops & Pharmaceutical Shops
Let's talk about the retail shops; they can be purchased with the intentions of rental incomes. Your tenant can open a grocery store, super-mart, vegetable shop, fruit shop, poultry shop, or medicine shops. People will always come to purchase the daily necessities of their life. Even in today’s situation, the retail shops are allowed to operate till 7:P.M, whereas the medical shops are allowed to run 24/7 on their own will.
If your current tenant owns a stationery shop, you can always rent it out to the person who is supplying what the demand is. With this mindset, your rental income will not be affected.
Shopping Malls and Commercial Shops
The commercial projects in Pakistan include all the business avenues, including shopping malls, flats, open retail shops and residential units, offices, and much more. In the time of COVID-19, you can invest in a shopping mall by taking advantage of the immunity provided by the PM Imran khan. The return of your commercial investment will be highly satisfying. You can purchase a shop for lower pricings and sell on huge profits.
If you are not an experienced investor in the commercial sector, you can still avail of the tax relief and capital gains; we are going to recommend you purchase a shop in an independent shopping mall, which can provide excellent ROI.
REDBOX Estate property consultant is suggesting you where to easily invest in affordable prices,
If you have purchased a shop inside a shopping mall, then your investment is secure if you book a shop in a less-developed mall than when it's fully completed. The prices will shoot up, and as an investor, you will be in profit.
Residential sector investors amid COVID-19
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The residential properties are used to provide shelter to couples, joint-families, and up-coming future shelter security.
According to sources, Pakistan is the 7th country in the world, with a faster-growing population (2.4%) and an ever-increasing urban population (3%).
Regional comparison of the housing shortage as a percentage of the total population
Source: Enhancing Builder Finance in Pakistan, Karandaaz, Pakistan.
The research has estimated that at the moment, Pakistan is facing a shortage of 10 million houses, and it is expected to reach up to 13 million by 2025, which is half of the shortfall in the urban areas. Keeping this in mind, many low-cost housing properties are developing in Karachi, Lahore, Islamabad, and many more cities.
Many builders and developers have initiated constructing low-cost housing projects towards the M-9 Motorway. As the central city of Karachi is over-populated already.
One of the most prominent developers of Pakistan, known as Bahria Town Karachi has also unofficially announced a low-cost housing society inside its gated community. It will have villas less than 100Sq—yards with all the perks amenities and facilities found in BTK.
As we all know that Bahria Town Karachi is out of the city limits, it is said to be in Malir district, but it is 29.0 KM, which is a 34 minutes' drive on the Hyderabad Motorway. Many genuine buyers or investors find the long path stressing for every day traveling. However, there is a new attractive housing society which is lower in pricing as compare to BTK and is just 7-8 KM away from Malir Cantonment. It is situated on Gadap Road next to Aviation Enclave and Commander Enclave, near the famous Baqai medical university.
This lucrative housing society is a small-scale project where a limited set of villas, apartments, and commercial shops is available—a 155. Sq Yards residential plots can be purchased at a lower price of 12.5 million in the off-plan stage. Once the project is completed, the prices are expected to double through withholding power of six months from to one year to earn maximum profits.
This project is suitable for genuine buyers and investors. Also, there are many overseas Pakistani who are returning to the country after winding up their set up in international cities. These foreign Pakistani will purchase real estate properties to reside or invest. This means that wherever the COVID-19 hits in the global cities, Pakistan will benefit from it as the overseas Pakistani will return to the country and spend their cash in the real estate.
The main is congested, colossal traffic, polluted air, shortage of water supply, and insecurity. Therefore, these types of housing societies are lucrative for the ex-pats and overseas Pakistani.
The society offers more than just housing; it also provides a healthy environment, lawn, clean air, water supply 24/7, SBCA and MDA approved, parks and playgrounds for the children entertainment and commercial shops for brands and super-marts.
All of these with a down payment of 2.2 million and installments of up to 3 years.
Many other housing projects are developing towards the M-9 Superhighway. It will be the new international standard Karachi city showcasing numerous elite and standardized housing and commercial projects.
An excellent opportunity before September 2022
It is a good chance to utilize the amnesty on the income source, before the wind-up construction in September 2022. The residential plots will get more attention over commercial plots as the house financing is available for residential plots only by the government.
Pakistan Real Estate Predicted in 2020
Even with the pandemic and global crises around the world, Pakistan real estate is predicted to perform well in 2020, the new taxes and property rules are clear for the buyers and sellers. Moreover, many developers are constructing and focusing on providing low-cost housing society, which will receive colossal attention from genuine buyers and investors from all around the country and abroad. Those investors who faced a massive loss in the stock exchange will get their money out from PSX and invest in the Real estate to secure their future. Also, several developments in other cities of Pakistan are under-way, especially Gwadar; CPEC is in its second phase, which is alone enough to more robust the economy of Pakistan, and it will have a good effect on the real estate values upon completion.
Overall, from any angle, it is vital to invest in real estate properties, even in the times of COVID-19, if you are still confused about your investment options, then get free of cost property consultant advice to have a more unobstructed view.
Also, contact our professional property consultants.
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