Lower Interest Rates May Boost Real Estate Market in Pakistan

Islamabad:Owning a home is a dream for most people in Pakistan, and many invest their savings in land or property with the hopes of securing a better future for themselves and their children. Historically, real estate investment in Pakistan has been considered a safe and profitable venture, with property prices typically seeing significant appreciation over the course of 5 to 10 years. However, recent economic challenges have severely impacted the real estate market, with property rates dropping significantly over the past 2-3 years.

Experts in real estate and economics suggest that the sharp rise in interest rates, reaching up to 22%, and the depreciation of the Pakistani Rupee have prompted investors to shift their capital from real estate to safer options like bank savings and foreign currency investments. However, with recent reductions in interest rates, from 22% to 13%, and the stabilization of the Rupee, there is renewed hope for the recovery of the real estate sector.

### **Impact of Reduced Interest Rates on Real Estate**

In an exclusive interview with *V News*, experts discussed the potential impact of the declining interest rates on Pakistan’s real estate market.

**Rana Muhammad Akram**, Vice President of the Realtors Association of Pakistan, explained that with the rise in interest rates, most investors had moved their capital away from real estate and instead invested in banks, gold, and foreign currencies. He noted that the reduction in interest rates will likely lead to fewer people investing in banks and more people redirecting their funds towards real estate, agriculture, or even setting up businesses like factories.

Akram further emphasized that this shift will gradually improve the economic conditions that had stagnated and led to losses in various sectors. While he acknowledged that real estate will not experience an immediate boom, he is optimistic that investment will pick up and property values will stabilize. For instance, if a plot was valued at 10 million rupees two years ago and is now selling for 6 million rupees, it is expected that prices will return to their previous levels in the coming months.

“If the interest rates drop even further, say below 10%, property prices will experience a significant upward trend,” he added.

### **The Role of Taxes in the Real Estate Slowdown**

**Mehtab Haider**, an economic expert and senior journalist, pointed out that one of the primary reasons behind the slowdown in the real estate sector is the increase in taxes by the government. The high taxes on property transactions have discouraged many investors, who find the tax burden too heavy to make property investments worthwhile.

Haider suggested that as interest rates decrease and people have more capital available, they are likely to invest in businesses or other sectors with higher returns, including real estate. “With lower profits from banks, people will seek to invest their savings in ventures that offer better returns, such as real estate and other business sectors,” he explained.

### **Looking Ahead: The Future of Real Estate in Pakistan**

Mehtab Haider also stated that the real estate market will see a significant recovery when interest rates fall into the single digits. He speculated that if the current economic conditions persist, there could be further reductions in interest rates after the fiscal year 2025, which would encourage more investment in real estate and lead to an increase in property prices.

According to Haider, “Once interest rates fall below 10%, we will witness a surge in investments in the property sector, and property values will start to rise again.”

### **Conclusion**

In summary, experts believe that the reduction in interest rates, coupled with the stabilization of the Pakistani Rupee, could mark the beginning of a recovery for the country’s struggling real estate market. While the full recovery may take some time, there is optimism that property values will increase as investors turn their attention back to real estate, which has traditionally been seen as a secure and profitable investment in Pakistan.