Big investors are injecting their excess liquidity in overseas housing projects after losing hopes of a rebound in Pakistani real estate market. The imposition of Capital Value Tax (CVT) in the current fiscal has burst the bubble of speculative boom in property values.

The CVT has proved to be a strong barrier to rising property values. The price spiral in real estate had to take a break. The lull in speculation has stopped the rapid transaction of property, a leading realtor told The News.

The rampant escalation of land value has ceased with the exit of speculators and lack of genuine buyers, he said. Housing projects of Dubai and its adjoining coastal cities are attracting worldwide real estate investors and business communities by its charm of easy investment policies and profit-oriented commercial activities.

Housing projects in Dubai, Sharjah and Ajman are hot favourites as they offer immediate and handsome profit to the investors, a leading Karachi-based overseas realtor Ameen Jibreel told The News.

To boost real estate investment, the governments of these cities have relaxed their visa policies (resident permit) in order to attract business community to expedite the development of real estate sector. However, many Pakistani investors want to get the revenue from rental values, he added.

The price of smallest one bedroom studio apartment starts from 6,25,000 Durham in Dubai while one per cent CVT like tax is charged by the developers on the transaction of property.As far as the construction period is concerned a mega housing projects is generally developed in two years. Payment is allowed in instalments.

In these cities, the rent is charged at one per cent amount of the total value of the property. So, the rent of Rs10 million (6,25,000 Durham approximately) one bedroom apartment is charged at Rs0.1 million (6,250 Durham approximately) whereas in Pakistan’s premium areas, the rental value has not exceeded 0.6 per cent of the value of whole property, that is, Rs60,000 rent on Rs10 million property.

Ameen Jibreel attributed high rental value in Dubai, which sometimes is more than one per cent of the whole property value to increasing demand and location of housing projects. However, he predicted the rental value could decline with the completion of these mega housing projects.

He pointed out that Pakistanis having businesses in Dubai and Sharjah are investing their money in the real estate. Moreover, frequent visitors to the city are also buying property.Leading real estate consultants revealed that very few realtors are marketing overseas projects due to lack of market access and absence of authentic reliable links.

Some real estate consultants are also shy of advising their clients on investment in Dubai after a leading media group marketing a housing project in Dubai shook investors’ confidence.The said media group failed to provide surety to investors that they would actually get the goods delivered.

On the other hand, some big real estate investors prefer to play a safe bet on mega housing projects being constructed in Karachi, Lahore and Islamabad. These housing projects would attract expatriate investors, Sami-ur-Rehman, CEO Real Estate Bank said.

“These projects would set the pace of market in near future,” he said. Some of the housing projects being constructed in joint ventures with foreign companies have three bedroom apartments costing Rs150 million to Rs300 million. Regarding growing land investment in Gwadar, realtors say that that speculative investors are shy to pour money because they want to reap quick harvest from short term investments.