The real estate market of Lahore is stagnant over the last two years and there are few sale-and-purchase transactions taking place. The investors who bought properties in the hope of making handsome capital gains by selling them after a few months or so do not find the option lucrative anymore due to the heavy taxes imposed by the government. Due to this, only the genuine buyers in need of housing are making the transactions while the investors are waiting for a better time to take a decision.
But when we talk about people looking for properties on rent, we find things are getting tougher for them by the day. In need of shelter, they have to have a property regardless of whether the prices are affordable or not, and take difficult decisions.
The situation in Lahore is different from that in Karachi because here the concept of vertical growth is not as popular and the rents of independent units are naturally quite high. Besides, the growth in city’s population and unbridled inflow of migrants from all over the country has increased the demand for rental properties that the city is unable to fulfil.
So the question is what solutions are available and how shall the city planners fulfill this pressing need of the masses. No doubt the people who are unable to sell out their properties due to high taxes are counting on rental earnings but the real issue is about affordability, security and convenience. How can all these be taken care of?
Syed Ather Ali Kazmi, Proprietor, Kazmi Estate, and president of Real Estate Advisers’ Association, Lahore, says the commonly accepted rule is that the ideal monthly rent of a property is around 0.5 per cent of the price of a residential property and 1 per cent in case of a commercial property. “As such, a house worth Rs10 million shall fetch Rs50,000 if it’s residential property, and Rs100,000 if it is commercial rent.
“But this is not always possible. Quite often, the residential houses are rented out for 0.3-0.35 per cent of their value. A five-marla house in Johar Town costing Rs10 million and rented out for Rs35,000 is a perfect case in point.
Kazmi further says that the major clientele for rental properties comprises outstation students who have come to Lahore for studies and early career professionals who are doing jobs in the city. “Unfortunately, they have to hire independent properties at high rates and beyond their needs. These segments can be accommodated in rental complexes built by the government as well as the private sector investors.”
Citing the example of some foreign countries, he says, such complexes have helped to serve the masses and also earn regular but reasonable income for the investors. “You should not always look for windfall gains and overnight profits. Investing in your masses and future generations must also be an objective,” he declares.
The situation is not quite conducive for the salaried class, as its representatives are spending at least 40 per cent of their income on house rent, and most of the time they are hiring portions. The high rents have also made people send their families back to their native towns and opt for shared living.
Gohar Majeed, Director, Trust Deals, a Lahore-based real estate concern, is of the view that the vertical growth model is ultimately making its way in. He cites the example of Gulberg, saying that it is becoming the downtown of the city with around 30 high-rise buildings to be completed shortly.
He also reveals that around 10 buildings have been sold out, 10 are in the process, and another 10 in the pipeline. There is hope that vertical growth shall ultimately find roots in the city, as housing at a distance of 25-30 kilometres from the city centre has its own issues.
According to Majeed, the trend is that the investors are building rental properties on their lands as selling it is less lucrative than earning a regular rental income, especially when short-term investments in real estate are not feasible. Secondly, people renting out portions of their houses has also become popular recently. “This practice was always there but now every other person is going for it.”
He agrees that the government and real estate developers have not catered to the needs of this segment, and focused mainly on buyers of property. On the other hand, smaller countries like Thailand have constructed condominiums where as much as 2,000 people can stay. “The rental sector shall be developed as people are always on the move and many have to hire different properties over time for different reasons. For example, when they switch their job they have to look for a property closer to their new workplace.”
The picture that emerges is that Lahore needs special attention when it comes to the provision of affordable rental properties to its people. The fact that the city’s population has grown at double the rate of Karachi’s, over the past 19 years, makes the situation even more alarming. This is a fact which is reported in the 2017 census results that state Karachi’s population is 14,910,352 while that of Lahore is 11,126,285. In the 1998 census, Karachi had a population of 9,339,023 while Lahore’s was 5,143,495. From 1998 to 2017, Karachi’s and Lahore’s populations have clearly grown by 59.65 per cent and 116.3 per cent respectively.
Shahid Musa, a designer and bookseller based in Urdu Bazar, says that although rents are on a higher side it has become a bit easy to get a house on rent. “As you have to give your details and enter biometrics in local police station, the owners find it safe to rent out their properties to you.”