Inflation and Real Estate in Pakistan

Real Estate in Pakistan is considered to be the back bone of economy in terms of cash flow and foreign investment, alone this industry connects 70 plus different large, small and medium industries all together which provides employment to thousands and create hundreds of jobs every year.

According to Pakistan Bureau of Statistics the total documented market cap of Real Estate in Pakistan is $350-$400 Billion. It was one of the fastest growing sector from the start of 2021, According to the Pakistan Credit Rating Agency's report on real estate sector, property prices have surged.?From December 2018 to December 2021 residential property prices have surged by 42.7 percent; housing prices by 43.8 percent; and plot prices by 30.2 percent.

Current economical turmoil in the country have hit every sector, negative ratings by international credit agencies and estimated inflation of 47.5% by World known economists and current 30% inflation in the country have weaken the purchasing power of people, population control is one of the biggest problem in Pakistan , this leads towards the increase in demand for houses , Plots and apartments.

Inflation effects in positive way for investors by appreciating the value of their investments , however is shrinks the number of potential buyers , on other hand the most negative impact of inflation on Real estate is consistent increase in building material. In country like ours where investors are mostly in profits, inflation effects the end users most.

Most central banks tend to increase interest rates with rising inflation. This affects the cost of borrowing who are looking to finance their real estate purchase. With the increase in borrowing and construction costs, building a new home is difficult in this inflationary environment. Ultimately it have slow down the market and making it more difficult for the end users to make a purchase of their dream home.