Role of Real Estate in the Economy of Pakistan
As per World Bank, the size of a country’s real estate assets makes up between 60 to 70% of its total wealth which means that our real estate sector is worth around $1.5 trillion to $2 trillion.
Real estate is the largest segment of our country’s economy and the sector is connected with the growth of 40 allied industries and 200 sub-industries.
The recent governments have shown extra interest in the sector which has greatly helped kick start new projects and at the same time attract more investment.
What does real estate entail?
When we talk about real estate most people assume that it is just about selling and buying property. It includes housing, hoteling, construction, retail, and much more.
Overall, the industry not just created millions of jobs but helps bring considerable revenue to the country as well. So far, the real estate sector’s contribution to the GDP of Pakistan has remained at 9% in the last decade.
Growth in real estate brings forth growth in the economy and growth in the economy brings forth further growth in real estate.
Growth of the sector throughout the years
We saw two booms in the sector since independence. The first boom came right after independence as millions of people migrated to the country and thus created a demand for housing.
The second boom came in the 90s when globalization helped us open our doors to foreign investment as many brands came into the country and thus bought, rented, and constructed various properties across the country.
Another important thing driving the real estate sector is the flow of remittances in the country. As more and more people moved abroad for better jobs and different opportunities, the money coming back into the country also increased. An increase in remittances also always has a positive impact on the growth of the real estate sector.
Future of real estate in Pakistan
Pakistan has one of the highest per capita demands for housing in the world giving its real estate sector massive potential for growth and contributing towards the economy of the country.
The country requires 20 million housing units by the year 2040 which will be provided through the utilization of planned and unplanned areas. Just meeting this demand alone with increase the job creation in the industry to reach around 20 million jobs in the real estate and allied sectors.
The unfortunate thing is that the data on the sector is very poorly managed and mostly undocumented which has caused its contribution to the GDP to be severely undervalued.
The impact of the sector on the economy and the lives of the people associated with it is so much that even during the covid-19 lockdown, the maximum focus was on reopening the construction industry since a major portion of our population is directly or indirectly employed by it.
Challenges for further growth
The current challenges that we face in taking full advantage of the sector for our economy lie in the lack of proper policies and regulations especially related to tax.
Since most people in the country are not filers, the government has no choice but to double down on making sure non-filers pay an extra amount whenever they buy, sell or transfer property within the country.
Real estate in this, however, had also been a great way for the government to recover tax money as investments in the sector have been at an all-time high in recent years.
The reason for such positive growth in the sector is that the real estate market has shown itself to be a more reliable and safer bet when it comes to the annual return of the investment that people make.
If the regulations are a little relaxed, we will see significant growth in investment as well as return on investment. More money flowing into the system is also a positive sign for the economy.
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