LAHORE: The newest symbol of sophistication in Lahore’s ever-so-vast urban sprawl, Defence Raya, Lahore, commonly known as Fairways Commercial, is witnessing a significant surge in demand and prices. Started three years ago, this commercial hub has become a key point of interest for the people of Defence Housing Authority (DHA), but more so for investors.
Rows of cafes, restaurants and clothing brands clustered around water fountains, Fairways commercial is as “DHA” as it gets. Despite a stagnating property market, and a general perception of slowness, this commercial hub has become a centre of attention for its extravagant design and luxurious outlook. With a growing suburban population in the outskirts of DHA-Lahore, the market size is also expected to rise, and so is the price.
The High-end price:
Talking to Profit, a real estate agency representative, specialising and dealing in Defence Raya Commercial properties, highlighted the current market excitement, saying that commercial plazas in Fairways Commercial used to be available in price range from Rs 13 crores to Rs 16 crores, two years ago.
In contrast, he said, the current market prices range from Rs 35 crores to Rs 45 crores. Newer buildings are under construction by DHA which are being priced from Rs 45 crores to Rs 52 crores.
The attraction for investors lies in the high commercial activity within the area, and the prices are expected to grow further due to this seemingly high demand.
A survey by Profit, into the prices of Fairways Commercial supports this claim. For instance, an 8-marla commercial plaza till the filing of this news, was on sale for Rs 56 crores, and another 8-marla property facing the golf course in DHA Raya Phase 6 is demanding Rs 50 crores.
Additionally, a 1-Kanal corner plaza in Defence Raya Fairways Commercial is currently listed for Rs1.45 billion, and an 8-marla building in the same area is on sale for Rs 38 crores. The rates of these properties vary according to their location and size.
The real estate agency representative further said that Raya Commercial stands out in Pakistan’s current commercial property market due to its exceptional growth and investor interest. The area has been bustling with activity over the past one and a half years, sometimes leading to challenges such as parking congestion. However, DHA has addressed this issue by expanding parking facilities around the commercial area.
“The commercial property dynamics in Defence Raya are influenced by its size and lifestyle that it sells. Its location in a residential neighbourhood evolves investor’s preferences, and sets a new real estate trend in DHA, Lahore. It caters to a diverse investor base since it offers everything, from offices, and restaurants to shops and warehouses,” he said.
He added that the increasing demand for retail spaces, driven by both established and emerging brands, underlines the robust nature of the retail sector in this area. These trends reflect the evolving preferences of buyers and investors, indicating a dynamic and potentially high-yield commercial property market in Raya.
Is it worth the money?
The high price point, however, comes with a fair bit of uncertainty from the investors. The land, albeit beautiful, is also limited. With an expanded parking space that would need a further upgrade once the newer buildings are complete, there is only so much expansion that DHA can undertake in Fair-ways. While that creates urgency amongst the buyers and drives up the price, it also runs the risk of a false appreciation of prices.
For instance, the estimated monthly rental income on a 50 crore-property is approximately Rs 15 lacs (3.6% annualised), and yet the market is led to believe that the 50 crore is a lucrative investment. Some real estate agents dealing in this estate show belief that the rates will escalate in the future which justifies the higher price point, however others have been sceptical. In certain cases, the price is so high that investors hesitate, pondering how delayed will the “profit” from such an investment be.
If one is buying real estate, they are expecting to either generate rental income or sell the property for a premium. Right now, the rental yield is low and the prices seem to be higher because of future expected returns on the property. The time required for this appreciation in rent and price is of key significance since it defines whether the present-day investment will be considered a profitable one or not. This is what causes hesitation.
The hesitation also stems from the substantial initial investment required and the concern that future profits may be lower than expected, potentially benefiting the seller instead. These reasons, coupled with some completely irrational pricing, are leading to a lot of the deals not being finalised, as per sources.
While some real estate market agents in DHA believe that despite the current surge in prices, investors are interested in Fairways commercial, others warn the investors about this surge.
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