Property stakeholders appear divided over apartment rates in the last three years in Karachi as some claim with confidence about a whooping increase in prices while others suggest declining and status quo situations in the rates in some areas.

Whether the investors take interest or not in real estate, the property market also moves with the help of the huge inflow of workers’ remittances. A conservative market estimate says that over 50 per cent of remittances find their way into the property business as people living abroad prefer investing their life savings in real estate.

Genuine sales/purchases relating to the movement of families to upper-income localities and issues of property dispute within families also keep alive real estate transactions. A decade’s old property of a joint family is sold under some compulsion thus opening new opportunities for family members to own at least low-priced used or new flats or go for a rental apartment.

Overseas Pakistan had sent a record $29.7 billion in 2020-21, up by 27pc over 2019-20.

Cumulatively, at $8bn, remittances grew by 12.5pc during the first quarter of 2021-22 over the same period last fiscal. The main sources of inflow were Saudi Arabia, the UAE, the UK and the USA.

Apartment rates in Karachi’s DHA area have declined by 20pc in the last three years whereas North Nazimabad’s flats have registered a 10pc rise, according to one estimation

CEO Citi Associates Shafi Jakwani said the apartment rates in Clifton, DHA, Civil Lines, Bath Island, Frere Town etc are now Rs 22,000-28,000 per square foot as compared to Rs 15,000-18,000 three years back. He was of the view that property rates had not seen any jump in 2021 and the above hike was mainly witnessed in 2019 and 2020.

Mr Jakwani attributed the price hike in flats or apartments to an increase in land prices, cement, labour cost, steel bars, construction material items etc. “Demand for buying a property exists but a 50pc rise in the construction cost in the last three years has made an adverse impact on the apartment rates.”

Offering a different view, President Defense Clifton Real Estate Association, Zubair Baig said apartment prices in Clifton have witnessed a rise of 10pc in the three years. For example, a three-bedroom flat at Chappal Ocean now costs Rs15 million as compared to Rs13.5m three years back while in Shadman Residency, a three-bedroom flat sells at Rs22.5-23m versus Rs20m.

In contrast, apartment rates in DHA areas have declined by 20pc in the last three years. A 1,700 sqft flat in DHA can be purchased at Rs17m which was priced at Rs25m three years back. In the Bukhari area, a two-bedroom flat is available at Rs 9.5m as compared to Rs13.5m.

While claiming knowhow on apartment rates of other city areas, Mr Baig said the North Nazimabad area has registered a rise of 10pc followed by a 15pc hike in the Maymar area.

He claimed that flat rates in some parts of Federal B Area and Gulshan-e-Iqbal have been almost unchanged in the last three years as compared to the 15-20pc rise in apartment prices in Gulistan-e-Jouhar.

“Frankly speaking, there are not many construction activities in Karachi. Upcountry destinations like Islamabad, Lahore, Quetta, Multan, Bahawalpur, etc have seen higher growth in construction work than Karachi,” he said citing larger investors’ presence outside Karachi. He said in Karachi, genuine deals between the buyers and sellers are being struck.

Owner of Parekh Estate in Clifton, Abdul Wahab Parekh, who also operates in other parts of the city, said apartment rates in Clifton have remained the highest which now costs Rs 25,000 sqft as compared to Rs 18,000 three years back.

At Khalid Bin Waleed Road and Shahra-e-Faisal, the rates for apartments are Rs 15,000-20,000 per square foot as compared to Rs8,000-10,000 while in Gulshan-e-Iqbal, the rates range between Rs10,000-12,000 as against Rs6,000-7,000 per square foot.

Rates in Gulistan-e-Jauhar and North Nazimabad are Rs8,000-10,000 and Rs10,000-11,000 per square foot as compared to Rs5,000-7,000. In FB Area, the rates hover between Rs 10,000-12,000 as compared to Rs 3,000-4,000 per square foot three years back.

Overall, apartment prices in Karachi have seen a jump of 15-25pc in the last three years.

He recalled that the property market in Karachi remained dull due to big investors’ lack of interest and restriction on high-rise buildings from 2017 to 2018. Property transactions returned to normal during 2020-21.

“Rates have not surged because of booming sale and purchase but they have gone up in view of inflationary trends in almost every items’ prices including construction materials,” he said.

Mr Parekh said investors have still parked their money in banks and are not putting it in the property business as perhaps they are still reluctant to take the risk despite the huge number of incentives and packages offered by the government to the construction sector.

He said the property market has been operating on a demand and supply situation as deals are being made depending on an opportunity or any chance.

However, builders are more interested in taking risks at National Highway, Super Highway, Malir, Taiser Town etc where they see some buyers.

Former chairman Association of Builders and Developers (Abad), Hassan Bakhshi said apartment prices had swelled by at least 50-60pc in the last three years owing to rising construction costs mainly.

He said steel bar prices are now Rs182,000 per tonne as compared to Rs70,000-80,000 per tonne while cement bags now cost Rs725 as compared to Rs 500 per 50 kg bag.

Increasing price trends in sanitary and tiles, blocks, wooden materials, paints, Reti and Bajri, etc have further fueled apartments’ prices.

He said land prices in Karachi had surged by 40-50pc in the last three years. He added that Karachi had seen few projects as the construction activities were mainly going on projects which had been approved earlier.

“Around 80pc construction activities have been thriving in Punjab as compared to Sindh,” he claimed, adding that only 14 public related projects had been approved in Sindh in the last three months which he considered as very slow growth.

Mr Bakhsi said around 30-40pc jump had been witnessed in the daily charges of plumbers, painters, mason (raj) and shuttering in the last three years. Furthermore, the massive rupee devaluation against the dollar from May 2021 (Rs152-153) till date (Rs 173 in the interbank market) has further played havoc with the construction material prices whose raw materials are imported from various countries.

Published in Dawn, The Business and Finance Weekly, October 25th, 2021