As soon as Pakistan secured a staff level agreement with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) celebrated in true style. The market recorded a sharp increase, it’s biggest in the past 15 years, in direct response to this highly anticipated event.
This staff level agreement was being considered by most as the starting point for honoring of many other financial assistance programs that were in the pipeline. Pakistan’s economic woes were exacerbated by the ongoing geo-political situation globally, and the commodity super-cycle, which further strained the economies of import dependent countries.
However, as we push past these testing times, and with more financial inflows in the country, both in the form of Foreign Direct Investment (FDI) and financial assistance, the country’s economy seems well poised to mount a decent recovery from current levels.
Internationally, Stock Markets are considered the “leading indicators” of a country’s economy. However, any country’s economy is comprised of many other vibrant sectors, such as Real-Estate and Large Scale Manufacturing, which act as the engine for growth in economies like ours.
The core topic of today’s post is, after the superb performance of PSX, is the country’s Real-Estate sector next? Well, the answer to most questions surrounding this argument would be in the positive.
Let us discuss some aspects of this topic, which would support the notion that Pakistan’s real-estate sector is well poised for a recovery, followed by a boom.
The Dream of a Home
Every nation has a few distinguishable characteristics, which can be found in the vast majority of it’s population. Having one’s own home, at any stage of life, is a dream that almost every Pakistani pursues, in true letter and spirit. Some are lucky enough to achieve this goal in early or mid life, but majority spend the most productive years of their lives in turning this dream to reality.
The pursuit of this dream has kept Pakistan’s real-estate sector alive and kicking for the past many decades. Given the high inflation rates in the country, every Pakistani wants to achieve this goal as early as possible. So, this is one factor that will keep generating strong demand for real-estate products in Pakistan.
The Hidden Value Proposition
Pakistan’s real-estate sector presents a very unique and attractive value proposition for most investors, both local and expatriates. The expats enjoy yet another advantage when investing in real estate, which is the positive effect of local currency’s devaluation.
For instance, if a Pakistani expat working in USA, wanted to purchase a property in Pakistan about 1 year ago, the dollar stood at around Rs.208 per US $. Now, the same currency has devalued to Rs.272 per US $, in July of 2023. This marks a devaluation of over 30%.
So, this has made the purchase of real-estate in Pakistan, even more affordable for expat Pakistanis. Now, they can purchase the same property by consuming 30% lesser dollars, or any other foreign currency for that matter. As a result, the hidden value proposition for investing in our real-estate sector has become even more attractive.
Infrastructure Development Projects
In countries like Pakistan, real-estate projects are highly dependent on infrastructure development projects initiated by the Government. In fact, there are a lot of cases where a real-estate project is started first, and then the support infrastructure follows suit.
Take the example of the country’s Capital, Islamabad, which is home to some of the most valuable real-estate in the country. After successful opening of a new International Airport near the M2 Motorway, a lot of new infrastructure projects, like the Ring Road, a couple of dams or water reservoirs, have also been announced in that vicinity.
As a result, the real estate projects around these areas have really taken off, and their future prospects are also quite promising. Two of the most notable real-estate projects in that vicinity, which will directly benefit from this, are the Capital Smart City (CSC) and Mumtaz City. The same is true for promising real estate projects across the major metropolitan cities of Pakistan, namely Rawalpindi, Karachi and Lahore.
Conclusion
Based on the above discussion, we can safely conclude that after the star performance of Pakistan Stock Exchange (PSX), the country’s real-estate sector is next in line to take-off.
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