Devaluation occurs when National currency of Pakistanbecomes cheaper in terms of either gold or other international currencies. Devaluation of currency is a major factor posing threat to Pakistan real estate. Starting from 1955 till today,Pakistan has experienced constant problem of currency devaluation. Its impact is evident on all other major sectors of economy as well. Devaluation is responsible for causing following impact onPakistan real estate.
Foreign investment decreases:
Foreign investment is an important indicator of booming real estate sector. We have seen that Pakistanfrequently gets foreign grant or aid but the voluntary investment in all the sectors of Pakistanby the foreigners is almost zero. So is the case with Pakistanreal estate. Though political instability, fear of war and other characteristics of a developing nation are also its reasons but devaluation of currency is a major factor responsible for it. Investors are reluctant to invest even in Lahore real estate, Islamabad real estate, Karachi real estate due to the fear of loosing their money. They are holding off their investments and are not willing to invest right now until stability occurs in its currency. In this way, Pakistan real estate sector is deprived of its share of foreign investment which can turn its fate into the most lucrative sector to invest in.
Demand of real estate decreases:
Devaluation is a major cause of inflation in Pakistan. Inflation is so high that it can be stated as hyper inflation. This Inflation is responsible for the increase in prices of Pakistanreal estate. On the other hand, employment level is also at the lowest end which is worsening the buying power of the people. In this situation, demand of the real estate has decreased as people cannot afford to buy Pakistan properties at such high rates in their low incomes. Especially the prices in posh areas of Pakistan's major cities like Karachi, Islamabad and Lahore are so high that a middle class person can only wish to invest in them. This lower demand has led to the distressed conditions of real estate businesses operating inPakistan. Real estate agents and owners of property are not finding any buyer in the market.
Hence, the effects of devaluation currency can be seen clearly on Pakistan real estate. Government and State bank of Pakistan should regulate their policies to bring stability In Pakistani rupee. They should devise stringent plans and effective monitory policy to curb inflation and devaluation form Pakistan.
Foreign investment decreases:
Foreign investment is an important indicator of booming real estate sector. We have seen that Pakistanfrequently gets foreign grant or aid but the voluntary investment in all the sectors of Pakistanby the foreigners is almost zero. So is the case with Pakistanreal estate. Though political instability, fear of war and other characteristics of a developing nation are also its reasons but devaluation of currency is a major factor responsible for it. Investors are reluctant to invest even in Lahore real estate, Islamabad real estate, Karachi real estate due to the fear of loosing their money. They are holding off their investments and are not willing to invest right now until stability occurs in its currency. In this way, Pakistan real estate sector is deprived of its share of foreign investment which can turn its fate into the most lucrative sector to invest in.
Demand of real estate decreases:
Devaluation is a major cause of inflation in Pakistan. Inflation is so high that it can be stated as hyper inflation. This Inflation is responsible for the increase in prices of Pakistanreal estate. On the other hand, employment level is also at the lowest end which is worsening the buying power of the people. In this situation, demand of the real estate has decreased as people cannot afford to buy Pakistan properties at such high rates in their low incomes. Especially the prices in posh areas of Pakistan's major cities like Karachi, Islamabad and Lahore are so high that a middle class person can only wish to invest in them. This lower demand has led to the distressed conditions of real estate businesses operating inPakistan. Real estate agents and owners of property are not finding any buyer in the market.
Hence, the effects of devaluation currency can be seen clearly on Pakistan real estate. Government and State bank of Pakistan should regulate their policies to bring stability In Pakistani rupee. They should devise stringent plans and effective monitory policy to curb inflation and devaluation form Pakistan.
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