Dr. Abdul Wahid, author of Dawn, highlights the role of real estate in Pakistan’s economy and its impact on the country’s financial landscape. The real estate sector in Pakistan is plagued with numerous issues, including overpricing, artificial growth, and various manipulations. Speculation and lack of transparency and regulation in the industry have resulted in significant asset-price bubbles, leading to a volatile market. Moreover, the lack of reliable data has made it challenging for investors to make informed decisions.
Similar to the casino sector, the real estate market has created a pricing bubble, which has widened the gap between intrinsic value and market value. This has resulted in an affordability crisis, as the cost of housing has outpaced the wealth growth of the middle class. Information cascades, media conditioning under state patronage, and speculative investments are driving the market.
Expatriates use information cascading to make real estate investment decisions, which refers to decisions made by people based on the actions and decisions of those around them. The actions of others act as guidance for those seeking to avoid the uncertainty of personal decisions. Additionally, various housing societies have agreements with renowned educational institutions, hospitals, and schools, further increasing real estate prices.
Institutional naming is a powerful marketing tool that contributes to the pricing premium, as it can increase the perceived value of any property. Moreover, the use of the name of government institutions without their respective permission is a seemingly legal paradox that creates a sense of security and prestige, leading to artificial growth and a price boom in the market.
The housing market in Pakistan has seen a financial boom in recent years. However, this growth is artificial and not driven by organic economic growth. Instead, it is fueled by factors like speculative investments, information cascades, and media conditioning under state patronage. The market is at a strong risk of crashing in case of dried foreign investments or if the government decides to introduce strict and controlled policies.
As a result, the gap between investors and the real estate market end-users is widening, creating a severe housing affordability crisis in Pakistan. This has ultimately turned out to be a bogeyman for middle-class end-users and an economic bogeyman for the state. It is crucial to address the issues plaguing the real estate market to ensure sustainable economic growth and development in the country.
To read the full article visit www.dawn.com
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thats the paradox.. this is the biggest sector and driving force of our economy. once markets are active, big players invest heavily to create artificial shortage, and property gets out of the reach of real buyers.