View Full Version : a nice story, good read

16th January 2007, 21:05
SHIRAZ Mahmood, a fresh graduate with a B.Com. degree from a private college, actively hunted for a respectable job back in 1999.
He couldn't find one even after months of efforts. Finally, he settled for the post of an accounts clerk at a knitwear unit with a salary of Rs1800 per month as he was considered a "raw hand" in the
job market which was highly saturated with the people equal his academic qualifications. He worked hard and managed to get a promotion in less than a year. He was made an assistant accountant
with the salary raised to Rs2600.

Though he clung to his low-paid job he was not satisfied with what he earned. "It was not the life I had dreamt of. I have never wanted much but wished for a middle class living, just like my parents.
That's all about my ambitions," he says.

"Even an illiterate labourer made more money than what I was getting after 14-15 years of education. Ironically, the accountant of the factory I was working under was getting a little over Rs6000 after
having worked in different private organisations during the last more than 15 years. That was frustrating but I didn't know what to

It was when the events of 9/11 took place on the American soil. The world began to change. Pakistan's economy also started turning
around. The inflow of the remittances shot up to around $4 billion from a mere $1.5 billion in 2001, which triggered an investment boom in property.. It was easier to invest in property than to set up an
industry or business for quick returns.

A major part of the remittances went into real estate. Price of the properties began to soar from the middle of 2002. The return of hundreds of expatriates after 9/11 fuelled the demand of plots for the construction purpose. That was the time when Shiraz quit his low-paid job to join a friend dealing in the real estate.

"I didn't require much investment to start the business," smiles Shiraz. "A mobile phone and a few advertisements helped in bringing the business. There was a lot of activity going around as people
with some spare bucks began investing in files (entitlement of ownership of a plot that does not physically exists), and plots.
Those with as little as Rs100,000 extra invested in real estate for quick returns."

"It was never so good. There was so much in this business. People sold and bought even those places which were unlikely to be developed in next 25 years," says Saleem-Ul-Haq Khan, a lawyer and
property consultant who is in this business for last many years. "Most people made a lot of money. One could make enough money through small investment in files and that too, for a few weeks.
Much of the activity was generated by the genuine buyers not the investors."

The increase in remittances' inflow and the return of Pakistanis from the US and Europe were not the only factors in skyrocketing the
property prices. As economy improved and macro-economic indicators stabilised, the central bank eased the monetary policy to encourage
investment in productive sectors. Interest rates dropped to an all- time average of 3-4 per cent from as high as 22 per cent or more.
There was a splurge in private sector credit and personal finance.

Investors, who also included industrialists and exporters, poured money into real estate as it promised quicker and higher margins on
their investment. Some independent analysts insist that a large part of cheap export refinance disbursed by the banks during and after
2002 found its way into speculative investment in real estate. Banks began financing in real estate and in cases like the Crescent Standard Investment Bank Limited, the banks themselves invested
heavily in property and in some cases in files, too.

"The entry of industrialists and banks into this arena was the single factor in bringing a boom in property business before it began to slide down - from the mid-2005 to the present level,"
insists Saleem. The boom was availed by many for money laundering..

"The decrease in return on bank savings also propelled the savers to opt for better margins such as in property and stock exchange," he

Saleem and many others involved in this business in Punjab say that this boom mostly remained confined to major urban cities. "This phenomenal rise was mostly confined to Lahore followed by
Rawalpindi, Sialkot, Faisalabad and some other urban centres of Punjab. Although, the rates went up in other parts of Punjab, but were far below than the levels in Lahore and major urban areas. It
was because most of the new housing schemes were launched in Lahore or Rawalpindi. There were few schemes coming up in other areas..

Nevertheless, industrial plots and agriculture land around Lahore here several new schemes were announced too began experiencing the
price heat from mid-2002 to 2005.

In Lahore, the price of residential plots multiplied as was the case
in the Defence Housing Authority (DHA), Gulberg and other developed
housing colonies like Wapda Town, the NFC and Valancia in the
suburbs of the city, near or on Raiwind Road.

In the DHA the price of plots surged from Rs3 million per kanal to
Rs10 million or more. In Valancia the rate rose from Rs0.8 million
to Rs4 million or more. The rates of files issued by some start-up
housing colonies without infrastructure (some issued the files even
without acquiring the land) in the suburbs of the city as well as
the DHA for its new phases like VI-X also raced up to 300 per cent,
allowing investors make huge money.

A major portion of the overseas investment and of big investors went
to the DHA. "It is one of the few housing schemes around the country
where investors and genuine buyers believe commitments would be
fulfilled.. That was why over 60 per cent of investment was made in
its existing and upcoming phases," says Khalid Hasan, a manager in a
real estate company.

The bubble exploded in the middle of 2005 when banks stopped plot
financing and hiked interest rates in line with the central bank's
policy to curb speculative investments and inflation triggered by
the splurge in credit and spending, higher food prices, and surging
international oil prices. As interest rates went up, industrialists
and big investors began pulling out their investments from real
estate which created panic thus easing the prices by around 40-50
per cent in the developed housing societies, while the rates
nosedived in schemes without infrastructure and development.

Sahir Chaudhry, a developer, says the bubble had to burst because of
over supply of the properties through developers like the DHA and
the absence of any check on the sale and purchase of files. Some
issued more files than the number of available plots and re-bought
and re-sold, thus artificially fuelling the market and encouraging
speculative investment.

"There is always a limit to investment. When the supply was
increased against the shrinking demand, the market was apt to crash.
Furthermore, the government, instead of channelising investment
scared the investors from the market. Factors like increased
interest rates too played their part".

Most developers and dealers are unanimous that the price of plots
and files has dipped by 40-50 per cent in societies like the DHA.
The fall in other areas was also steep. "Some people have lost all
their investment because there are little chances that those
societies will ever be developed. Even if sponsors are sincere, it
will take years before they could give possession to allottees. The
business of files is over except in the DHA", says Saleem.

"During last one year the activity in real estate has slowed down as
transactions are far and few. There are no buyers or sellers" says
Naeem Tahir Sheikh, an investor adding, "property rates have
declined substantially but are still far above their pre-9/11
levels. "There is no chance of prices ever dipping to pre-9/11
level," he says.

Property dealers goad one into investing in real estate as according
to them the prices are at their lowest and are unlikely to fall
further. However Sahir says that only those should invest who have
the power to wait for at least two years. "The activity may revive
in another six months if something extraordinary happens. But there
are no chances of market stabilisation before two years.

"There is little to worry about. The market will gradually stabilise
to go up. We still are cheaper in the region, the fact realised by
developers from the Gulf who are heading here. The slowdown has
rendered hundreds, if not thousands of matriculate or slightly more
educated, jobless. "There have been job cuts. Why keep a large force
if you don't have work for them", asks Khalid "Once the market
stabilises and activity picks up, they can come back or others will
replace them," he adds. Shiraz too finds himself out of work for the
time being. But he is not much worried because he is one of the
luckiest to have had exploited the opportunity that was afforded to
him. "I have made good money, saved a part of it, and invested the
remainder in the establishment of a small garments manufacturing
unit along with a friend. I can wait for a few more years for
another boom in real estate," he says.

But there are few lucky people.