The real estate sector is one of the most successful sectors in Pakistan which manages to capture the real essence of interest in Pakistan. On the contrary, managing it is not just a matter of buying a place and making a profit from it by selling for a higher price. For being successful at the trading business and get profitable payback at your investments, you have to know all the realities of real estate investing in Pakistan. It involves many considerations that you need to keep in mind with an adequate knowledge of the finance involved.
Firstly, you will have to know that there is not a single definition of property investment. It involves many different perspectives and processes that need to be sliced in every case for matters of all kinds.
There are a lot of categories involved in real estate investments, however, we provide you with a list of those that are applicable to Pakistan market:
- File buying
- Buying plots for reselling at a better market value
- Getting a property for renting out
- Getting open land for the sake of development
Let’s dive deeper into these types:
File for a property is a future plot in an area, specifically a society with no allocation. The documents are issued prior to any establishment of society and are popular among future investors. Once a file has been associated with an established area of land, the rates of the area rise at a significant level. This means that the return on the investment at the stage might be high.
A file, in this case, can be the way to tell you how you can invest in real estate with low finance involved if you want to buy it in earlier stages.
In order to be sure that you do not mix up buying files and plots, you can take help from the key differences that are listed below for your convenience.
Buying plots for reselling at a better market value
It is usually a common practice in real estate investment in Pakistan. Many people get a property and then wait for its value to go up, and when it does, they sell it at a higher value, thus making more profit.
The rise in the value gets better with time as the project develops further. However, it can be a bit tricky, so one needs to be careful in the process. You will have to investigate a bit and then your job is done.
Getting a property for renting out
Getting a house, apartment, or a property for commercial uses and leasing it is a good category of property investment where one can get more income from a second source. You stay the owner of the property and get a better return on investment via the rental income.
You can just look through our tips for renting out your home for further clarification.
Getting open land for the sake of development
It is relatively a safer yet rarer type of real estate investment in Pakistan. It revolves around getting open and under flourished land which is not a part of any society. Investors that choose this deal expect that a developer will be buying the land from them at more profitable rates for establishing a project.
On the current level, getting an open land is a recent fashion in many areas of Gwadar, that is being developed under the China-Pakistan Economic Corridor plan.
Major advantages and disadvantages of property investment
Fixing currency in the property market value is not something everyone can do easily. There are some advantages and disadvantages of property investment that you have to consider. That is why you will have to be careful prior to make your move in the field.
Advantages for investing in real estate:
- Potential for better returns on investment in a considerably short span.
- A solid asset that will give you profit
- On renting out, it can be a stable secondary income source
- Can be used for personal cases
- A good asset to pass over to your relatives
- The actual price value might be lesser than the expected price
- The property taxes involved might be problematic for some
- Urgent liquidation of the real estate is not possible
- Values of property can be fallen down in certain situations
- Fraudulent practices might come in between
What steps do you need to take?
If you are new to the world of real estate investment, you might be worried about not having enough knowledge and expertise regarding real estate investment in Pakistan. On the other hand, you do not need to worry about it. There are a few simple things you need to consider for getting success in this field. When you get a grip on these steps, you can be easily benefited from the fruits your tree of patience will bear.
Some of the important points are the following:
Find out about your requirements
Firstly, you need to consider all your goals regarding property investment.
You need to find out about your holding power, which is the actual time that you are going to hold on to your purchase prior to putting the land or house for sale. Moreover, you need to confirm the actual budget so that way you can easily conduct the research. In addition to that, you will have to decide if you wish to invest in a city where you are living.
Do complete research
When you have focused on all your goals, you need to do all your homework by properly checking all options available for real estate investment that fit according to your needs. For a better property investment in Pakistan, you can take help from professionals.
In addition to that, you need to make sure that the property you have an interest in has all approvals that are relevant. You can get to know about the development authority of the area that you are interested in for further confirmation.
It is a better idea for talking to a few agents regarding the demands and prices in the designated area. The information will be giving you a better idea regarding the uprise in the value of the property that you can expect. With more research, you might also be able to find out your methodology using which you can invest in a property with minimum money.
Get your property
After you have done your research and you have considered all options for real estate investment in Pakistan, you will need to make a purchase. For this, you will have to keep in mind all legal formalities, and taxation system for getting the transfer and sales checked via a lawyer.
In addition to that, you need to consider the area and stage of development of the plot. Factors like these have a big influence on how easily the rates rise up. It is advised you buy the property and get it approved by related confirmed authorities, and this way, you do not lose out on the investment in any case of legal issue.
If you are new in the property business, the guide on buying a new home for your first time will indeed assist you in a fruitful manner.
Wait for the right time or get a reliable tenant
It is a bit complicated as this stage is the one where seasoned investors are differentiated from amateur market investors.
There are a few factors that influence or dictate how long you have to keep your property. These include the ongoing trends in the market, situation in the country regarding politics, the state of flourishment, location of the project, and the reputation of the developer. For instance, projects going in the Defence Housing Authority are quite famous for local as well as foreign investors as they have a good reputation and better-establishing rate than most of the other projects.
When it comes to renting out your property to secure a stable secondary income, there are some considerations you need to keep in mind.
Firstly, you need to have a signed and written agreement tenant between the parties that are involved in the business deal. The document has to outline all the span of the tenancy, the rent value, and the date of its payment.
It will also tell the time span after which the rent would be increased, and the procedure of eviction if you want your property for your own usage.
The clause of the eviction must also include what actions will be construing urgent eviction. Get the agreement registered with your law enforcement agencies, that way, you are not responsible for any
illegal activities by your tenant. Indeed, the authorities will make sure that eviction occurs if any disagreement arises on the occasion if the tenant shows any resistance.
Sell out your property
This is the step where you get to have the profit for your investment. When you realize your property has reached its peak that it deserves to get, it is time to earn some profit by selling your property.
However, you need to consider a few things for getting the best possible rate and the return on investment:
Do not depend on just one resource
You do not have to depend on only agents or portals for finding the rate of the property you want to sell or buy. You can communicate with a few agents and get the idea of some ongoing trends in the market and have a look at what the market has to offer.
Be certain about the property value
You will have to make some efforts regarding this step such as contacting some agents and get to know the price value of the property from the perspective of the buyer. After that, you will have to do the same procedure, only this time, get to know about the value through a seller’s perspective. The accurate value would be lying somewhere between the quoted rates, as the rates of the buyers are usually higher than the seller’s rates.
Try to meet the other party in person
If you are a buyer or a seller, getting to know the other party in person can be an effective way for the whole process. You can also verify the status of the ownership and the legal status this way.
Go for token money at the beginning
When the deal is negotiated, the seller will get the token money. It is a guarantee that the buyer will be purchasing the property. The money is actually a little percentage of the total value of the property and is ideally between 50,000 Pakistani Rupees to 100,000 Pakistani Rupees.
Verify the documents
You will have to go to the society’s office and get your documents verified. It will confirm your property’s status that you wish to get. When you are selling out the property, make sure the transfer letter has been issued to the customer in their name.
This was our guide regarding property investment in Pakistan. For a better insight into the real estate market in Pakistan, have a look at some tips on our website www.faizanbarai.com, especially at property rate that applies to the house or plot, on selling your property for a better value.