Dubai prop­erty re­mains at­trac­tive for Pak­ista­nis

The Pak Banker - - BUSINESS -

Pak­ista­nis were ranked among ma­jor in­vestors in the Dubai real es­tate in­dus­try (in the non-Arab for­eign in­vestor cat­e­gory) in the past few years. The trend is likely to con­tinue de­spite a re­mark­able im­prove­ment in the Pak­istan prop­erty in­dus­try, which is see­ing dras­tic growth ow­ing to in­vest­ments by over­seas Pak­ista­nis.

With an in­vest­ment of Dh30.64 bil­lion in the Dubai prop­erty mar­ket dur­ing the past five years, Pak­ista­nis are among the top three non-Arab for­eign in­vestors, which also in­clude In­dia and United King­dom. The ma­jor por­tion of this in­vest­ment is ac­counted for by Pak­istan ex­pats in the UAE and Gulf re­gions who pre­fer to in­vest in Dubai be­cause of good rental yields.

In­dus­try ex­perts say in­vest­ment in ro­bust mar­kets such as Dubai should be wel­comed as they pro­vide buy­ers with an ex­tra stream of in­come, a ma­jor­ity of which re­turns to Pak­istan in the form of re­mit­tances, help­ing the na­tion's cur­rent ac­count bal­ance. The ex­perts added that buy­ing prop­erty in the UAE is costlier than in Pak­istan, but the ex­cep­tional re­turns make the in­vestor for­get the ini­tial hard­ship.

With the UAE dirham pegged to the dol­lar, any rise in the dol­lar's value im­proves the dirham's buy­ing power as well. There­fore, a rental in­come in dirhams trav­els much far­ther than one in ru­pees, en­cour­ag­ing many Pak­ista­nis to take a leap of faith into the UAE real es­tate mar­ket.

Dubai re­mains a very at­trac­tive in­vest­ment mar­ket be­cause of high rental yields, which hover around eight per cent to 10 per cent. In many cases, in­vest­ment in Dubai or any other for­eign mar­ket creates av­enues for re­mit­tances back to Pak­istan through prof­its from sales or rental in­come of prop­er­ties owned by Pak­ista­nis, which ul­ti­mately con­trib­utes to the econ­omy.

Re­mit­tances re­ceived in July to De­cem­ber from the UAE in­creased 9.4 per cent to $2.1 bil­lion on a yearon-year ba­sis. In­flows from the UAE had reg­is­tered the largest in­crease (26.1 per cent) from any ma­jor re­mit­tance-send­ing coun­try in 2014-15 when Pak­istan re­ceived $4.1 bil­lion from ex­pats in the UAE, State Bank of Pak­istan (SBP) data shows.

The ma­jor por­tion of re­mit­tances to Pak­istan from the UAE is con­trib­uted by ex­pats re­sid­ing in Dubai. In the first seven months of the cur­rent fis­cal year 2015-16, re­mit­tances from Dubai have recorded a 39.7 per cent year-on-year surge as Pak­istani ex­pats in Dubai re­mit­ted $1.67 bil­lion to their coun­try. A Dubai-based Pak­istani ex­pat said he in­vested around Rs4.5 mil­lion in La­hore two years ago and now the value of his prop­erty has al­most dou­bled due to on­go­ing in­fra­struc­ture and de­vel­op­ment projects in the city. He in­tends to take a per­sonal loan and in­vest more in the prop­erty sec­tor, in­di­cat­ing his faith in the in­dus­try's strong re­cov­ery and bet­ter re­turns on his in­vest­ment.

With a marked im­prove­ment in the law and or­der sit­u­a­tion in gen­eral and the econ­omy in par­tic­u­lar, over­seas Pak­ista­nis are in­vest­ing in ma­jor hous­ing schemes in key cities. The Pak­istan real es­tate in­dus­try seems to be more at­trac­tive for ex­pats as they in­vest pri­mar­ily in houses, res­i­den­tial and com­mer­cial plots.

Karachi, La­hore and Is­lam­abad are the prime fo­cus of over­seas Pak­ista­nis who prefer­ably want to in­vest in Karachi due to a sta­bil­ity in the se­cu­rity sit­u­a­tion. The coun­try's prop­erty mar­ket is fac­ing a sharp up­ward price trend for houses and res­i­den­tial plots in ma­jor cities as it at­tracted a ma­jor chunk of record $18.79 bil­lion re­mit­tances in fis­cal year 2014-15. In­dus­try in­sid­ers say a lot of Pak­ista­nis in­vest in prop­er­ties abroad, es­pe­cially in Dubai, while on the other side, a ma­jor por­tion of in­come gen­er­ated in for­eign lands finds its way back to var­i­ous eco­nomic sec­tors, in­clud­ing prop­erty. A re­cent re­search re­port shows that ap­prox­i­mately 93 per cent of Pak­istani ex­pa­tri­ates in the UAE want to pur­chase prop­er­ties back home.

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