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Role of Real Estate Industry in the economy of Pakistan

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The real estate industry plays a significant role in Pakistan’s economy as a large proportion of the labor force is directly or indirectly employed in this domain. Real estate rights are important in both public and private sectors and will impact many other sectors like industrial, retail and sales, commercial, residential, recreational ad tourism, etc. The real estate industry has a very diverse value chain that includes many economic agents like legal services, property management, real state service providers, consultant and construction companies, financial institutions, and investors.

Highest demand of real estate in Pakistan

Pakistan has the highest per capita demand for housing globally, real estate industry has the potential to contribute greatly to the economic uplift and revitalization of the country’s economy. The country needs 20 million housing units by 2040. Keeping this in view, the previous government had announced generous patronage for the real estate sector.

Real estate demand could increase job opportunities

If 20 million housing units are created by 2040, It will lead to the creation of 15 to 20 million jobs in the real estate market and its allied sectors. This real estate sector will also increase the pace of Industrial growth and local production. Therefore, we may easily conclude that real estate is one of the main drivers of Pakistan’s economy.

At the face of it, Real estate industry seems like a good opportunity for many middle and small-scale investors as it is considered a very stable investment, and one that is bound to pay dividends in short to middle term, and in that regard, it is, but there are always two sides to a coin

Real estate adds no value to Pakistan’s Economy these days

Viewing from a broader perspective and from the lens of macro and microeconomics, many problems caused by the real estate industry appear to the discerning eye. Pakistan’s economy faces elite capture of a particular kind, elites that add nothing to the productivity of the economy. The real estate industry is at the very pinnacle of such elite capture activities.

Economy’s link with investment in Real Estate

Investment in developing the value chain industries of the real estate sector could not only make this sector sustainable but it could become a valuable contributor to exports. But the major focus of investors is solely fixated on buying of land .70% of Pakistan’s remittances are bound up in buying urban land as plots which are later flipped at a profit.

The value of this urban land rises only due to the rapid urbanization and development of economic activity hubs with no effort required from the investors. This rendering the real estate industry unproductive. Plots business is such a capital-intensive business that no job is generated from the businesses of millions.

If one ‘invests’ in a plot of 100 million, it is possible to get 100% profit in one year, but in the meanwhile, your plot business has not been able to provide employment to any single person. If the same amount of investment is made in agriculture, hundreds of people can be employed

The rampant spread of real estate is also engulfing agricultural lands, and it is also being patronized by the government, a recent example is the Ravi Urban Development Project.

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