Real Estate Investments In Pakistan

Introduction

The idea of becoming financially secure and finally achieving financial freedom drives the people of Pakistan to invest in real estate. Real estate investing is the most common way to create wealth. Most people think it requires a lot of money but actually, you can start from minimum amounts after the concept of shared spaces was recently introduced.

Real estate is an evergreen market because it is a basic need of every individual; thus, its demand never dies.

Whether you are just starting to invest or an expert investor already, let’s discuss the various ways you can invest in Real Estate.

Types Of Real Estate Investments

Investment can be made during any stage of the real estate lifecycle, it totally depends on your requirements and capacity for investments to be able to invest in real estate at any particular time.

Take a look at what we will be discussing below:

All real estate investments start from vacant land.

Vacant or Raw Land

At this stage of real estate, one can buy land in towns, villages or near cities to lease it for farming, warehousing, agriculture or selling it for real estate development.

The owner of the vacant land earns through the regular cash flow income from rent and when he sells it after appreciation in its value.

During Real Estate Development

Real Estate Developers introduce new innovative projects in the market from time to time that is initially on paper, i.e. new construction projects, e.g. new housing societies, residential or commercial buildings, etc.

These types of investments have an expected completion time in several years and are primarily categorized as long-term investments.

Following are the ways investors can benefit from real estate at the time of development.

Installment Schemes

The property can be booked or held by any investor or end-user on a payment plan that starts with a small down-payment that ranges from 10% – 30% of the total value while paying the remaining payment in installments until the time of completion according to mutually agreed terms.

This type of investment is feasible for those who:

• Want an ease in payments.
• Don’t have enough capital to purchase a ready property.
• Are on a salary and generate small excess cashflows.
• Are building assets for their children.
• Are looking to save money.
• Are saving their money from devaluation.
• Have a diverse investment portfolio and don’t want to put all their eggs in one basket.
• Don’t want to spend all of their money on real estate at once.

Discount Schemes

All real estate developers offer various types of discounts to facilitate their customers. The most common of them are discussed below.

Flat Discounts:

5% – 10% and sometimes up to 20% flat discounts can be applied if the investor or end-user meets the conditions made by the developer. The most common requirement is that payment is made in half or the total amount.

This type of investment is feasible for those who:

• Have enough capital to afford paying in full.
• Are looking to get more returns on capital amount.
• Are looking to get an asset for personal use on a cheaper amount.
• Are looking to save their money from devaluation.

Rental Discounts – Assets:

Rental discount is a new scheme introduced in the real estate industry of Pakistan which is applicable on assets and shared spaces. It’s a percentage of the agreed amount of the property (usually 12% to 15% annually), broken into monthly returns until project completion. This percentage variates from project to project and developer to developer.

This type of investment is feasible for those who:

• Are looking for cash flow income.
• Are looking to get more returns on capital amount.
• Are looking to get an asset for personal use on a cheaper amount.
• Are looking to save their money from devaluation.

Shared Commercial Spaces:

Shared commercial spaces are contractually shared ownership of allocated space within a building e.g. cafe, shop or brand outlet.

The agreement with the developer is for investment in a defined space in square feet which is not handed over on project completion. The shared owner only enjoys the cashflow returns with capital gain on his investment and the invested space will be repurchased back by the developer whenever the shared owner wants to sell.

This type of investment is feasible for those who:

• Cannot afford to purchase a real estate asset.
• Are only looking for investments and not assets for personal use.
• Are looking for cash flow income.
• Are looking to get returns on capital amount.
• Are looking to save their money from devaluation.

Wholesaling

The process of buying a deal or property in bulk from a real estate developer and selling it to small dealers & end-users for a profit or signing of a contract for an individual property with a seller on a decreased amount and selling it to an end-user at a higher price.

This type of investment is feasible for those who:

• have a large or small sum of capital they can use to agree on a contract.
  
  • real estate agencies
  • real estate agents
  • investors
• Are looking to make profits without having to completely own the property.

After Real Estate Is Developed

At this stage when real estate is developed be it a society, plot, house or building; the population starts to move in. The roads begin flowing with traffic, the need for residence and business starts increasing due to which the following types of investments come into play:

Buy & Hold Investing:

In this type of investment, the investor buys a property and holds it for capital gain. e.g. If he buys and holds a plot he will get capital gain as the value of real estate appreciates with time.

This type of investment is feasible for those who:

• Want a risk free investment even if its more expensive than developing real estate.
• Have enough capital to afford purchasing a ready property on cash.
• Are looking to save their money from devaluation.

Buy & Rent Investing:

In this type of investment, the investor buys a property and finds a tenant for cashflow income i.e. rent. E.g if the owner buys a shop, house, or apartment he also gets rental income in addition to capital gain.

This type of investment is feasible for those who:

• Require monthly recurring income to prepare for retirement.
• Want a risk free investment even if its more expensive than developing real estate.
• Have enough capital to afford purchasing a ready property on cash.
• Are looking to save their money from devaluation.

Property Flipping:

Investors either purchase the property completely or are on a contract to sell. They renovate the property to sell it for a profit. i.e. they purchase a potential old house that needs repairs and also improve it to make the house more valuable for potential customers.

This type of investment is feasible for those who:

• Want to make a good profit quickly.
• Wants to gain good knowledge and experience about real estate.