Pakistan realty prices shoot up on expat fears

After the terrorist attack on the World Trade Center (WTC) in New York on September 11, 2001, Pakistanis living abroad are increasingly feeling unsafe and returning to their homeland.

With expatriates pumping money into real estate, property prices in Lahore and Karachi have shot up remarkably.

According Hameed Wahid, an news anchor with Pakistan's only business channel, Business Plus, prices of real estate have shot up because Pakistanis living abroad have started purchasing land in Pakistan so that they have the option to migrate in the future.

A few months after the WTC attack, real estate prices in defence housing societies in Lahore and Karachi started rising. These are posh areas and can be afforded only by expatriates, or the "dollar people".

"This is because Pakistan started receiving remittances from expatriates soon after the attack," says Wahid. For instance, Damac Investment Company of Dubai wants to invest as much as Rs 20 billion in real estate projects in Pakistan.

The Pakistani economy grew 6.4 per cent in 2003-04. The economy was valued at $72.3 billion in 2003 compared with $61.2 billion in 2002.

"As banks became cash rich, they disbursed nearly Rs 8 billion for the housing sector, inflating property prices," said Wahid.

Rising realty prices have forced traders and manufacturers to switch over to real estate trading. According to Abdul Sattar, a traditional horse breeder, he has shifted his focus to real estate following the boom.

"Can you believe it? I bought a plot five years ago in Gulberg in Lahore for just Rs 3 lakh. Yesterday, I received and offer for Rs 37 lakh for the same," he said.

The government, however, is worried over the increase in speculation. "The cement industry is in a crisis right now, which shows that people are just buying plots and not constructing. There are reports that the underworld and corporations based in Dubai have been investing," said Sattar.

Reacting to the reports, the government has swung into action and the National Accountability Bureau is investigating purchases in private societies and the State Bank of Pakistan has ordered banks not to lend money for land purchases.