Investing in real estate post Covid -19
After doing a detailed analysis and research over the past few days I have come to the conclusion that everything I have been telling you the past few years is now fast becoming a reality. The only thing which has probably not happened as per my expectations is that I never foresaw Covid-19 and how it will further speed up the shift of real estate towards project construction, house on installments, high rise and developed areas rather than non-possession plots & files.
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Government has been promoting real estate construction projects for some time now and wanted to shift things slowly in the right direction. However the polices announced by the Government to give a relief package to construction sector will just speed up the process.
We expect that between 1.5 to 2 trillion rupees of black money will come into circulation in real estate commercial construction sector in the next 2 years or so.
This is certainly going to be the game changer and we may experience a boon in coming days. There are going to be 3 areas in general you should be looking at for investment.
This includes all High rise buildings including malls, apartments, offices etc, independent units of commercial or houses being built on cash or installments for resale. While you can invest in independent units of commercials and houses and enjoy the amnesty offered by the Government on source of income declaration. Your profit however will be determined on your quality of construction and past experience related to construction. Experienced builders can take advantage of this though and build houses at lower costs and sell on a handsome profit.
If your purpose is just investment to either enjoy the amnesty or the capital gains or both and you are not an experienced builder than I will only recommend you select high rise apartments such as Downtown Mall, Goldcrest Mall, Springs apartments, Madison Square etc.
All indicators and Govt policies are pointing towards the fact that this area is going to get the maximum benefit from the present market and amnesty.
Investing in order to sell independent units of houses or commercials if you are not an experienced builder is futile as you will risk getting low profits or in worst case scenario no profits at all and get your investment stuck for a very long time.
However if you invest smartly and wisely in areas we recommend than I am sure than you can make upto 100 % in next 2 to 3 years.
Commercial Possession Plots
The source of income amnesty is only applicable to those areas where you can start construction before 31st Dec 2020. If you take an example of DHA Lahore these areas include DHA Lahore Phase 1 to 8 (except z ivy green) and 9 town, DHA rahber sector 1, 2 & 3. Phase 9 prism and phase 10 are not eligible for investment under this amnesty. Also any files or non-possession plots in these developed phase from 1 to 8 can not enjoy the amnesty given by the Govt.
It is also important that you start construction before 31st Dec 2020 and complete your project before Sep 2022.
It is important to note that just buying a commercial possession plot in a developed area will not make you eligible for source of income amnesty. You will have to start a construction project on it before 31st Dec 2020, however if there is a demand in this sector for construction the plot prices will go up as well and if you just invest without constructing you may still make some money.
Residential Possession Plots
Investment in residential plots will follow the same pattern as of commercial plots. I am also 50-50 as of now about which one will probably give you the best returns. It is also possible that residential plots in certain sector will outperform commercials and vice versa.
However if you want to enjoy source of income amnesty you must also start construction on it before 31st Dec 2022 and finish it before Sep 2022. The effects of the amnesty will also be more pronounced in developed areas as those will be the only ones who will recieve all the black money in the market.
Another additional feature which may push residential plots ahead of commercial plots is the possibility of house finance. We are hearing that finance for construction will only be available for residential plots. Thus they will enjoy a leverage over commercial plots and should perform better.
The information and analysis we are sharing is based on the policies and package announced by the Government of Pakistan. If these policies are changed, amended or replaced than their impact may vary and we will update you ASAP.
Captain (Retd) Shahnawaz Yaqub Bhatti
Investment Consultant and CEO at Imlaak
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