The real-estate monoculture

[nahtanbob]

Pakistan’s wealthiest individuals are heavily invested in real estate, rather than in innovation or industry​

By Masood Lohar

Pakistan’s unchecked real-estate sector is swallowing resources and land, driving up property prices while stifling growth in manufacturing and technology.

Unlike its neighbours, Pakistan’s wealthiest individuals are heavily invested in real estate, rather than in innovation or industry. This has significant consequences for wealth distribution and economic health.

In South Asia, India’s top 10 billionaires have a combined net worth of almost $400 billion, with the 100th wealthiest holding about $2 billion, spanning industries like technology, healthcare, and manufacturing. None of them is primarily tied to real estate.

In stark contrast, Pakistan’s richest individuals derive their wealth from land speculation. This concentration of wealth in an unproductive sector highlights the lack of investment in sustainable industries like manufacturing, agriculture, or technology, raising concerns about the country’s economic planning.

Decades of poor economic choices have deepened this problem. The nationalization of industries in the 1970s stifled industrial growth, while loans amounting to $12.5 billion, spent on flashy infrastructure projects, failed to boost manufacturing or exports. Instead, the economy has become reliant on real estate, and the outcome has been disastrous.

Property prices have surged, making homeownership unattainable for low- and middle-income families, exacerbating economic inequality and fueling social unrest. The dominance of real estate has also siphoned resources away from other vital sectors, preventing economic diversification and making the country vulnerable to a potential real-estate crash.

The sector’s opacity has fostered corruption and money laundering. Transparency International consistently ranks Pakistan poorly on the Corruption Perceptions Index, largely due to unregulated property transactions. Illicit funds flow into the market, inflating property values, and driving away legitimate investors, further hindering economic growth and diversification.

Environmentally, Pakistan’s real-estate obsession has been catastrophic. Deforestation rates are among the highest in the world at 1.5 per cent annually, according to World Bank data. Agricultural land is rapidly shrinking, jeopardizing the country’s food security. Cities are expanding into farmlands, and unplanned developments are blocking natural waterways, leading to urban flooding, as seen in Karachi’s 2020 floods.

Despite an escalating water crisis, fresh water is recklessly used in construction rather than treated sewage, as is common in other countries. Over 21 million people lack access to clean drinking water, yet precious resources continue to be squandered on unsustainable real-estate projects. Traveling across the country reveals the relentless spread of housing developments, with new colonies springing up along highways, ravaging green spaces, and exacerbating the risk of climate disasters.

This over-reliance on real estate is unsustainable. The sector’s dominance diverts resources from manufacturing and technology, preventing economic diversification and long-term growth. Corruption and money laundering also distort the economy and erode public trust.

For Pakistan to break free from this destructive cycle, it must shift toward economic diversification. Manufacturing, technology, and agriculture hold the potential for sustainable growth and job creation. The government must introduce policies that encourage investment in these sectors and curb rampant speculation in real estate.

Corruption in the real-estate sector must also be tackled head-on. Implementing stringent anti-money laundering measures and improving transparency in property transactions are crucial steps toward restoring investor confidence and stabilizing the market.

Pakistan’s fixation on real estate is widening the gap between the rich and poor, while undermining its long-term economic viability. The environmental toll, shrinking agricultural land, and unsustainable reliance on speculative investments paint a bleak future.



The writer is the founder of the Clifton Urban Forest. He tweets/posts

masoodlohar and can be reached at: [email protected]

 

[hydrabadi_arab]

Real estate market have crashed in Pakistan so this article doesnt make much sense.

 

[nahtanbob]

Real estate market have crashed in Pakistan so this article doesnt make much sense.

Has it crashed in USD terms or Pakistani rupee terms ?

 

[Asfandyar Bhittani]

Has it crashed in USD terms or Pakistani rupee terms ?

Neither. It has slowed down due to devaluation and inflation. People now have to wait longer to accumulate enough funds to buy property, resulting in more supply and less demand compared to like 2021.

 

[kambhakt]

Real estate market have crashed in Pakistan so this article doesnt make much sense.

The crash is recent. The movement of industrialists into real estate business has been going on for long. I might be because of the large role remittances play in the GDP of Pakistan. While some goes to the upkeep of families in Pakistan. The other part seems to go almost exclusively into real estate. This was maybe making real estate the most profitable business to be in.

 

[nahtanbob]

Neither. It has slowed down due to devaluation and inflation. People now have to wait longer to accumulate enough funds to buy property, resulting in more supply and less demand compared to like 2021.

there is a slowdown and uncertainty. I see that. Given demographic trends I doubt there will be a steep fall.

 

[hydrabadi_arab]

Has it crashed in USD terms or Pakistani rupee terms ?

Both but more so in USD terms.

DHA is must premium housing society in Pakistan, owned by army. Its prices are more stable then all others because of security if provides. And yet its plot prices have dropped up to 60% in rupee terms since 2022. In USD terms is even worse.

 

[hydrabadi_arab]

The crash is recent. The movement of industrialists into real estate business has been going on for long. I might be because of the large role remittances play in the GDP of Pakistan. While some goes to the upkeep of families in Pakistan. The other part seems to go almost exclusively into real estate. This was maybe making real estate the most profitable business to be in.

Overseas Pakistanis have stopped "investing" because in USD terms there has been only losses in last 15 years. Number of economically uneducated overseas Pakistanis being happy for ROI in rupee have also declined. Which is why now you see even in rupees there is huge decline in DHA land prices despite currency devaluation since 2022.

Now overseas will only build homes to live there if at all. Pakistan rental market isn't mature enough to worth investing in.

 

[Developereo]

The crash is recent. The movement of industrialists into real estate business has been going on for long. I might be because of the large role remittances play in the GDP of Pakistan. While some goes to the upkeep of families in Pakistan. The other part seems to go almost exclusively into real estate. This was maybe making real estate the most profitable business to be in.

I have always said that foreign remittances were fueling a real estate bubble in Pakistan which was unfair and a disaster for ordinary local Pakistanis. Residential real estate purchases should be restricted to local residents with verifiable sources of local income.

The same bubble has been forming in India. Many Indian-Australians complain that they can't afford to buy property in India even with Western incomes.

 

[agidest]

I have always said that foreign remittances were fueling a real estate bubble in Pakistan which was unfair and a disaster for ordinary local Pakistanis. Residential real estate purchases should be restricted to local residents with verifiable sources of local income.

The same bubble has been forming in India. Many Indian-Australians complain that they can't afford to buy property in India even with Western incomes.

Indian real estate is definitely in a bubble. The challenge is that there is a severe shortage of jobs in villages so everyone and their dog is/wants to migrate to the cities. That makes it difficult to separate real demand from investor speculation.

Nothing comes close to the Canadian real estate bubble. That's close to popping. Immigration has fueled a cost of loving crisis here.

 

[kambhakt]

I have always said that foreign remittances were fueling a real estate bubble in Pakistan which was unfair and a disaster for ordinary local Pakistanis. Residential real estate purchases should be restricted to local residents with verifiable sources of local income.

The same bubble has been forming in India. Many Indian-Australians complain that they can't afford to buy property in India even with Western incomes.

We have the bubble too. But maybe not as bad as Pakistan. And industrialists have not lost interest in industry.

The much maligned Raghuram Rajan had created regulations for real estate financing to prevent overheating when he was RBI governor.

 

[Developereo]

Nothing comes close to the Canadian real estate bubble. That's close to popping. Immigration has fueled a cost of loving crisis here.

LOL, it's a race as to which bubble is the worst.

In Australia, everyone is almost resigned to the fact that we now have a permanent two tier society, separated between those who own a house and those who will never be able to afford one in the cities. This separation will go down generations as the parents with homes help out their children, whereas those without are forever locked out.

And one of the dark sides of democracy is that those with money and influence, who are all homeowners, and politicians, who are also homeowners, pay only lip service to the problem while exacerbating the problem. Business, big and small, wants more migration so the governments keep increasing migration which fuels both house prices and rents.

When the reserve bank wants to raise interest rates to curb this house price madness, there is howling from all quarters, especially the media which, again, is full of homeowners. The media is full of gloat about house prices and promotes each multimillion dollar sale of average houses as some sort of medal tally.

 

[nahtanbob]

LOL, it's a race as to which bubble is the worst.

In Australia, everyone is almost resigned to the fact that we now have a permanent two tier society, separated between those who own a house and those who will never be able to afford one in the cities. This separation will go down generations as the parents with homes help out their children, whereas those without are forever locked out.

And one of the dark sides of democracy is that those with money and influence, who are all homeowners, and politicians, who are also homeowners, pay only lip service to the problem while exacerbating the problem. Business, big and small, wants more migration so the governments keep increasing migration which fuels both house prices and rents.

When the reserve bank wants to raise interest rates to curb this house price madness, there is howling from all quarters, especially the media which, again, is full of homeowners. The media is full of gloat about house prices and promotes each multimillion dollar sale of average houses as some sort of medal tally.

Ditto to some degree with Canada and coastal USA (mainly a blue state issue)

 

[EugeneP]

Pakistan’s wealthiest individuals are heavily invested in real estate, rather than in innovation or industry​

By Masood Lohar

Pakistan’s unchecked real-estate sector is swallowing resources and land, driving up property prices while stifling growth in manufacturing and technology.

Unlike its neighbours, Pakistan’s wealthiest individuals are heavily invested in real estate, rather than in innovation or industry. This has significant consequences for wealth distribution and economic health.

In South Asia, India’s top 10 billionaires have a combined net worth of almost $400 billion, with the 100th wealthiest holding about $2 billion, spanning industries like technology, healthcare, and manufacturing. None of them is primarily tied to real estate.

In stark contrast, Pakistan’s richest individuals derive their wealth from land speculation. This concentration of wealth in an unproductive sector highlights the lack of investment in sustainable industries like manufacturing, agriculture, or technology, raising concerns about the country’s economic planning.

Decades of poor economic choices have deepened this problem. The nationalization of industries in the 1970s stifled industrial growth, while loans amounting to $12.5 billion, spent on flashy infrastructure projects, failed to boost manufacturing or exports. Instead, the economy has become reliant on real estate, and the outcome has been disastrous.

Property prices have surged, making homeownership unattainable for low- and middle-income families, exacerbating economic inequality and fueling social unrest. The dominance of real estate has also siphoned resources away from other vital sectors, preventing economic diversification and making the country vulnerable to a potential real-estate crash.

The sector’s opacity has fostered corruption and money laundering. Transparency International consistently ranks Pakistan poorly on the Corruption Perceptions Index, largely due to unregulated property transactions. Illicit funds flow into the market, inflating property values, and driving away legitimate investors, further hindering economic growth and diversification.

Environmentally, Pakistan’s real-estate obsession has been catastrophic. Deforestation rates are among the highest in the world at 1.5 per cent annually, according to World Bank data. Agricultural land is rapidly shrinking, jeopardizing the country’s food security. Cities are expanding into farmlands, and unplanned developments are blocking natural waterways, leading to urban flooding, as seen in Karachi’s 2020 floods.

Despite an escalating water crisis, fresh water is recklessly used in construction rather than treated sewage, as is common in other countries. Over 21 million people lack access to clean drinking water, yet precious resources continue to be squandered on unsustainable real-estate projects. Traveling across the country reveals the relentless spread of housing developments, with new colonies springing up along highways, ravaging green spaces, and exacerbating the risk of climate disasters.

This over-reliance on real estate is unsustainable. The sector’s dominance diverts resources from manufacturing and technology, preventing economic diversification and long-term growth. Corruption and money laundering also distort the economy and erode public trust.

For Pakistan to break free from this destructive cycle, it must shift toward economic diversification. Manufacturing, technology, and agriculture hold the potential for sustainable growth and job creation. The government must introduce policies that encourage investment in these sectors and curb rampant speculation in real estate.

Corruption in the real-estate sector must also be tackled head-on. Implementing stringent anti-money laundering measures and improving transparency in property transactions are crucial steps toward restoring investor confidence and stabilizing the market.

Pakistan’s fixation on real estate is widening the gap between the rich and poor, while undermining its long-term economic viability. The environmental toll, shrinking agricultural land, and unsustainable reliance on speculative investments paint a bleak future.



The writer is the founder of the Clifton Urban Forest. He tweets/posts

masoodlohar and can be reached at: [email protected]

I am not in favor of real estate investing. However, if investors in Pakistan find that is the avenue for wealth creation, what is to complain? Real estate, if considered as a business or industry, promotes production of steel, cement and other construction materials. It employs a lot of skilled, semiskilled and even unskilled labor since construction in Pakistan is likely a labor-intensive operation. Finally, people get useful structures to dwell in. What is not to like? Pakistan, given its current human resource talent, can't produce microchips or pharmaceuticals or aircraft. Construction seems a fine avenue for generation of employment.

 

[hydrabadi_arab]

We have the bubble too. But maybe not as bad as Pakistan. And industrialists have not lost interest in industry.

The much maligned Raghuram Rajan had created regulations for real estate financing to prevent overheating when he was RBI governor.

In Pakistan banks hardly give loans to buy homes or land. The buble was mostly thanks to overseas Pakistanis investing followed by local industrialists.