To be able to do away with the hassle of shifting rented houses now and again, Nouman Younus is in search of a place to purchase. He is aware that the influx of Chinese in Pakistan is going to take it way beyond his reach in case he was not able to lay his hands on a property soon.
Having been made to leave four rented places in the last five years for one reason or another, he and his family now wanted to buy a place of their own. These last five years – from January 2012 to December 2016 – have also coincided with a surge of about 180 percent in house rents based on average per Marla rental price of one kanal houses, according to data gathered by Zameen.com – Pakistan’s largest property portal.
As the Chinese influx grows
Real estate experts say this rise is going to see an even sharper spike when more Chinese come over in connection with the China Pakistan Economic Corridor (CPEC) and need to be accommodated. According to a Reuters’ report, about 71,000 Chinese nationals that year visited this country in 2016 – a 41 percent increase on 2015. And 27,596 visa extensions were granted to them the same year, suggesting more are staying in the country for longer.
“In few years you will see Chinese people roaming the streets without any fear,” says Ghazanfar Mehboob, General Secretary Pakistan Real Estate Industry Forum (PREIF).
Compared to the Pakistanis, Chinese have higher buying power simply because 100,000 Chinese Yuan is roughly equal to Rs1.5m. So, the natives are going to be pushed out of the market, just because the Chinese have fatter wallets.
Initially Chinese lived in upscale gated-societies like the Askari Housing Scheme, the Army Housing Scheme, the Creek Vista and others. But with ever-improving law and order situation, they are now getting out of those select, protected communities are increasingly found renting houses in areas like the DHA and Clifton, making it quite likely that they would soon be moving to other posh and less posh colonies, like Gulshan and Nazimabad, says Gazhanfar.
Ghazanfar says he saw a Chinese woman in Nooriabad. When he tried to help her, thinking she might have lost her way. Her response was surprising for Ghazanfar. She was not lost at all but was actually looking for patrons on the street to sell cellular phones to make some dough on the side, having tagged along with her husband who was here to work on a CPEC-related project.
“In the next few years we might see the Chinese sitting in the Saddar area selling mobile phones on a plastic sheet spread on the sidewalk,” said Ghazanfar.
Realtors say presently only government officials are coming but when they go back and speak around about opportunities in Pakistan, other Chinese will also make a beeline to Pakistan for investment, and their coming over in droves shall make the prices in the real estate sector hit the roof.
Housing shortage further exacerbated
According to State Bank of Pakistan, the country already needs 12 million houses. Increasing demand in this scenario is a natural phenomenon, says Saad Liaquat a chartered accountant engaged by Abdullah Estates as CFO.
Another factor exacerbating the situation with regard to the provision of new housing units in the rest of the country is that most big builders and real estate hot shots have shifted their focus to Gawadar, expecting huge windfalls as the recently-developed port and the city become the CPEC’s main outlet.
The yearly rent, Ghazanfar says, should increase by only 0.5 percent of the property price. But over here it was skyrocketing, indicating massive demand.
In residential areas, the last five years saw rent in Karachi, the highest in the country, went up by 189.84 percent, while in the same period Lahore also saw a rise that was less but only marginally – about 179.44 percent. Islamabad was third, with 95.92 percent in residential rents while Peshawar stood on 61.81 percent increase.
Although Quetta witnessed the upward push of about 30 to 40 percent in general, but value in areas where Afghans are in majority decreased by as much as about 40 to 50 percent. The scenario is likewise in Peshawar mainly owing to Pakistani law enforcing agencies’ crackdown on Afghan refugees.
According to Nouman Younus, the tenant, the reason for dislodgement from all his previous four rented residences was the owners asking him to do so. When the tenant remains in one house for over a year, the rent tends to increase according to the contract, which is usually around 10 percent. But the landlords occasionally feel that could get a higher jump in rent. Hence, they ask the tenant to vacate so that they could get a bigger increment on rent.
Switching and shifting houses is a cumbersome business. Apart from giving one the nomadic feeling, the effort and the cost is quite demanding. For instance, shifting to an average house worth Rs20,000 in terms of its monthly rental, could cost the tenant at least Rs60,000 – in broker’s commission, transportation costs and enhanced advance or security deposit.
Besides the costs involved, there are other issues too. First of all, finding a new house is in itself a challenge, then landlords prefer smaller families, they also check their community and some even some inspect their sect too. And while during transportation of household belongings the labourers don’t care and damage valuable things.
Lahore, business community’s favourite metropolis
On the other hand, Lahore seemed to be popular city among the business community as in commercial property rents, Lahore topped the list with a surge of 129.28 percent based on the average per marla rental prices of 5-marla commercial properties, according to Zameen.com.
In the same category, Karachi was second highest with 108.77 percent increase in the last five-year span – compared to Lahore around 20 percent less while Islamabad witnessed 98.94 percent hike and Peshawar 40 to 60 percent, an agent told Zameen.com.
All the cities saw rates increased with the exception of Quetta, which experienced a 40 percent to 50 percent decline in commercial properties rent due to weak law and order situation, an agent told Zameen.com.
But realtors forecast that decreases in Peshawar and Quetta are temporary, as it is due to government’s decision to repatriate Afghan refugees, and prices may again see upward movement.
This steep inflation in raise in rents may not have singularly come with the influx of the Chinese, but CPEC definitely is a factor in reinforcing the trend.
In the rest of the country in near future, the real estate sector is likely to see the gap between supply and demand widening – the Chinese realtors are aware of it, so they are also looking to tap this sector too, says Mohammad Hassan Bakshi senior vice president Association of Builders and Developers of Pakistan (ABAD).
A delegation of Chinese companies recently approached ABAD, seeking to establish a real estate chamber of commerce to conduct joint ventures.
The Chinese looking at a share of the pie
The Chinese companies have hired people who are also researching the Pakistani real estate market. China has huge conglomerates, their one steel mill – China Steel Corporation – can provide steel equivalent to our whole industry or their one tiles-manufacturer can produce equal to our entire production, he says.
Local businessmen are aware of the enormous challenges that the Chinese entrepreneurs and conglomerates. That’s why the government has been asked that foreign companies should only be allowed on condition of a joint venture with local companies so that the local businessman could learn from them.
The Chinese and local investors are showing a keen interest in the $180 billion real estate market of Pakistan. Eventually, the combination would fill the gap between demand and supply in the market but it may take a decade or more. Meanwhile, middle-class people like Nouman Younus perhaps cannot do any better than laying their hands on a property of their own to beat the fast-approaching spike in the sector.