How to Invest in Real Estate in Pakistan
Written by: Neelam Shahzadi
Reviewed by: Majid Hussain
Pakistan’s real estate investment has garnered the attention of many, not just locals but also overseas investors. It is no surprise as the sector is one of the safest and best ROI-generating means in the country. Real estate investing for beginners can be very intimidating, though, but with the right knowledge on navigating the market, they can earn handsome returns.
This article provides the most comprehensive guide for real estate investors, especially rookies, covering types of real estate investment in Pakistan, a step-by-step guide to investing, further tips for becoming a wise investor, how they get the return on investments, and what is in store for new investors in Saffron City Islamabad.
Types of Real Estate Investment in Pakistan
Real estate investment is more than just buying and reselling properties when they appreciate for the sake of capital gains. There are a lot of ways how to get started in real estate, but the following means are the most prevalent in Pakistan:
Purchasing Files
Files are basically unallocated or unowned plots issued before the property is developed into a housing society. Once they are established in a society, their value dramatically increases. Buying files is a good practice for those who want to invest a little money and are in it for the long term. Whilst plot files are cheaper and returns can be very handsome, the government is not associated with them, so without adequate real estate investing research, frauds and scams can happen anytime.
Purchasing and Reselling Plots at Higher Rates
Purchasing and Renting a Property
Purchasing an Open Land Foreseen for Development
This is so far one of the riskiest ways to invest in real estate, which needs deeper research, as there is no definite way of telling whether it can generate returns or not. Investors purchase open land from underrated areas not yet owned or developed by any housing society hoping that developers will buy their land in a future development project.
Step-by-Step Guide to Real Estate Investment for Beginners
Do In-Depth Research
Investors need to determine their goals first—holding power or the amount of time they can hold a property, budget, location of investment, and more—which are crucial for conducting the right market research. They can gather real estate price and demand trends in their chosen area, who the developers are, and other latest news online or by talking to property investment experts.
Buying investment properties depends on these results, as in some cases, investing in commercial properties may be more profitable than residential ones. Likewise, according to the demand trends, it might also be better to invest in plots. Those who know the ins and outs of real estate win in this industry.
Check Approvals
Aside from making sure the developers are reputed for reliability and great outcomes, investors should also check if the property they eye for has the necessary approvals, such as NOC from CDA in Islamabad. Projects approved by the regulatory authority guarantee safety and good returns on investment, as they are verified to have no legal issues.
Seek Help from an Authorised Agent
Real estate can be very tricky, especially for rookies who do not know how to do proper market research and determine if certain land or property will become profitable or not. They need to be extra meticulous in all aspects. Finding the best real estate agent can make a huge difference in how much profit they can earn and help them avoid real estate fraud as well.
Working with an agent is also the best way to learn how to invest in real estate, as agents guide their clients throughout the way, introducing profitable investments whilst making sure they stay on track with their goals and budget. One of the rising agents in the country is Legend Properties, having the most in-depth knowledge when it comes to Islamabad properties.
Seek Help from an Authorised Agent
Real estate can be very tricky, especially for rookies who do not know how to do proper market research and determine if certain land or property will become profitable or not. They need to be extra meticulous in all aspects. Finding the best real estate agent can make a huge difference in how much profit they can earn and help them avoid real estate fraud as well.
Having one is also the best way to learn how to invest in real estate, as agents guide their clients throughout the way, introducing profitable investments whilst making sure they stay on track with their goals and budget. One of the rising agents in the country is Legend Properties, having the most in-depth knowledge when it comes to Islamabad properties.
Work on Real Estate Finances
Once investors determine their budget and which properties are profit-worthy, they need to set aside a considerable amount to fund their investment, either through their savings or loan. Taking a Strength Weakness Opportunity Threats (SWOT) analysis can greatly help determine which funding method suits them.
After all, real estate is a business. The healthier the finances, the better the returns. How investors fund their purchased property will either break or make their venture. There are many other options that investors should discuss with their agent beforehand. Finances are the foundation of real estate on where to start.
Visit the Property
Visiting the land in person at least once is crucial. Investors should not simply rely on the images provided by the sellers or any multimedia channels where they found out about the property. Some scammers show pictures of the land but sell another.
It is also best to bring a surveyor along to check any discrepancies in the property. For instance, some lands are watery, which can greatly affect the foundation of house construction. This land condition, however, would be good for investors looking for agricultural types.
Learn About the Master Plan
When visiting the location, buyers should also make sure they know about the housing society master plan. A master plan is an adaptable and extensive planning document that serves as a blueprint to direct the future expansion and progress of an area.
It includes various aspects such as population, economy, housing, transportation, community facilities, and land use, providing analyses, recommendations, and proposals. A well-crafted master plan is characterised by its practicality and ability to yield a positive return on investment.
Meet and Negotiate with the Seller
Once investors have decided on a property, the next step is to meet the seller. Estate sellers usually mark their prices up, but this can be easily brought down by proper negotiations. Trying to negotiate the price down as much as possible can greatly help investors save up their hard-earned money.
Investors should not miss out on asking for all the details about their property investment as well, including the land’s area, surrounding amenities, potential legal issues, and more. Note that trustworthy sellers are transparent in providing information and in dealing with all kinds of transactions.
Pay Token Money
To demonstrate their earnest intention to buy the assets, investors must pay byana/token money, which is based on the selling price that they agreed with their seller. Usually, sellers charge 5 percent of the total property price.
They have to make sure every transaction is put on paper, such as a check or order, and is done through legal mediums. In the real estate business, investors should avoid buying through hard cash as it can be really difficult to track. In case they change their minds about buying the property, they might not be able to claim the money back.
Finalise the Deal
This is the time investors purchase the property and ensure that their plot is transferred to their name or on the transfer list and sort out all the other complex legal details with a lawyer. They can get their transfer or allotment document from the governing authority’s office.
They should be able to get full possession of their plot. This is something to be wary of as some scammers claim to sell plots, but what they actually sell are plot files. Investors should have full measurements of the plot before finalising the deal.
Get a Copy of the Sales Agreement
A sales agreement, also referred to as a sales contract or agreement to sell, is a legally binding document that outlines the terms and conditions of a transaction. Investors should insist on obtaining a sales agreement when making investments.
Pay Through Bank Pay Order
Bank pay order ensures transparent transactions and that the money is not put at risk. The bank issues a pay order to the buyer, which includes the specific amount and recipient. Only after all payments are made can the buyer claim ownership of the home or assets.
Pay the Agent’s Commission
When everything is done, investors should take care to compensate their real estate agents for their diligent efforts. The agent has invested considerable time and effort in locating the best property at the most favourable price on behalf of their clients, so the latter must pay the agent promptly with the commission they agreed on.
Hold the Property or Rent it Out
How long property owners should hold their real estate investments depends on several factors, including market trends, the developer’s reputation, project location, the project’s state of development, and the general political situation. Selling property is really tricky, especially for beginners, which is why this phase is what separates rookies from experienced investors.
Whilst waiting for buyers, they can also find suitable tenants to generate rental income on the side, making sure they include an eviction procedure in case they need the property for personal use. The eviction clause should specify actions that warrant immediate eviction.
So that the property owner can be protected from any legal repercussions from the renter’s unlawful actions, they should provide a copy of this agreement to local law enforcement authorities. The authorities will ensure that the eviction process proceeds as required, even if objections are raised by the tenants.
Sell the Property
Buying and selling is the usual cycle in the real estate industry. Once the property reaches its highest value potential, the next step is to sell. Investors should make sure to meet their buyers in person to ensure a smoother transaction and avoid receiving hard cash as much as possible.
Best Practices for Becoming a Wise Investor
As a beginner, it is wise to hire an agent and learn what investing in real estate alongside. Rookies should learn from other seasoned investors as well. Here are what the latter have in common:
They Invest Only in Reliable Schemes
Experienced investors exclusively invest in well-established and proven communities, as private institutions carry substantial risks. Previous successful returns from investments in smaller companies may not ensure the same outcome in the future. They do in-depth research on how to buy real estate first before experimenting.
Some invest in Real Estate Investment Trust (REIT). REITs are a type of mutual fund that specialise in investing in properties and real estate. They generate income from these investments, which is then distributed to the unit holders of the REIT. This scheme guarantees affordability, diversification, liquidation, good returns, transparency, and flexibility.
They Are Tax-Compliant
Pakistan’s government is getting stricter about tax compliance for both overseas and local people. Overseas investors file tax returns and pay tax on the income generated from their property. Long-standing investors understand the consequence of not filing taxes, so despite the current complexities of Pakistan’s tax filing system, they continue being compliant with their tax obligations.
They Keep Learning
In Pakistan real estate market, those who dig in without knowledge lose. Seasoned investors do not stop learning about the industry they are in, knowing how it grows at a fast pace. They devour all mediums they can find, such as blogs, books, YouTube channels, TV shows, and podcasts.
They Have a Strategy
If you fail to plan, you plan to fail—this rings true in the real estate sector. Good investors have a practical, feasible, and holistic strategy. They consider whether they invest in every kind or focus only on one niche, diversify their portfolio in one city or more, wait for the right time when their property’s value increases, and others.
They Are Well Aware of Their Holding Power
Buying a property, given the extra expenses, is already expensive. Investors usually hold their properties for three to five years, unless they have a large amount of money, and sell them once the demand springs high.
They Invest for Profits
Even if the property is acquired as a vacation home, substantial expenses for maintenance are expected each year. Investors who earn handsome profits invest in commercial properties or investment houses specifically intended for rental purposes or resale.
They Do not Fall for High-End Marketing
How Do You Earn in the Real Estate Sector?
Investing in real estate can be a great hedge against inflation. Most importantly, the government offered tax benefits for investors. With adequate real estate knowledge, here are how investors earn from their property:
Rental/Cash Flow Income
Cash flow income is generated by acquiring and effectively managing properties to generate rental income from tenants. Investing in rental properties is a reliable and passive source of income. Aside from apartment buildings, cash flow can also be derived from other real estate assets such as storage units, a floor, office spaces, retail establishments, and rental houses. Agricultural land can also be rented out.
Real Estate-Related Income
This revenue stream is common in the real estate sector, used by both investors and brokers. A notable portion of real estate brokers’ earnings is derived from commissions earned through assisting clients in buying or selling properties. Real estate management companies, on the other hand, retain a portion of the rental income to cover operational expenses.
Real Estate Appreciation
Investors earn good returns by waiting for their property’s value to increase, or appreciate, before selling it. This is one of the simplest opportunities in real estate to earn money. Appreciation occurs when a property experiences a rise in value due to changes in the real estate market. For instance, homeowners often renovate their houses and add new features, consequently enhancing the overall value of their property.
Ancillary Real Estate Investment Income
This is also one of the best income-generating investment opportunities in real estate, currently known for its potential for significant profits. It involves various supplementary sources of revenue, such as vending machines installed in office buildings or laundry facilities provided in rental apartments.
Saffron City Islamabad: What Is in Store for New Investors?
It is projected that the population of Islamabad alone will reach 2.5 million by 2025. The capital city presents a plethora of career and business prospects, resulting in a notable move of individuals from rural areas to urban centers. This trend has consequently increased the demand for properties in Islamabad.
It is best for real estate beginners to be prudent about experimenting in the property market and stick to established and proven options. The safest and most ROI-guaranteeing of all in the city is Saffron City Islamabad, developed by Saadullah Khan & Brothers (SKB).
Saffron City Islamabad is yet waiting for NOC approval as it is yet under development, but as of the current market situation, it is expected to generate great returns, given that it offers convenient access to various significant landmarks in Islamabad and Rawalpindi.
Saffron City Islamabad is conveniently located near Rawat, DHA, and Bahria Town, adjacent to GT Road. Access to the projects is facilitated through Rawat Chakbeli Road, GT Road, and Islamabad Expressway. It offers 5 Marla, 10 Marla, and 1 Kanal house, all at affordable prices.
The plots available for sale in Saffron City Islamabad are currently open for purchase, providing the people of Pakistan with a lucrative investment option at competitive rates. The owner and management have diligently worked to create an impressive luxury-to-price ratio, making this project truly exceptional.
The launch date for Saffron City Islamabad was initially set for March 2023. Currently, the project is going at a fast pace. Whilst it has not yet officially launched, plot bookings are currently booming.
Frequently Asked Questions
Investors should look for agents with the most listings. They can also ask for referrals from their family, friends, previous agent, or a relocation specialist. Islamabad property investors should prioritise agents who know all about the best investment options in the city.
The buyer typically pays the token amount directly to the seller immediately after making a verbal commitment. During this stage, many buyers tend to overlook the importance of paperwork, considering it to be an unnecessary hassle, which should not be the case as they are required in case of needing a refund.
A notarised document serves as proof of payment of the token money to the seller and establishes the terms and conditions of the purchase. If the buyer fails to complete the transaction, the seller will usually forfeit the token money unless there is a notarised agreement between the parties stating otherwise.
There are no existing rules yet as to how much one should pay for token money, but ideally, they should be 5 to 10 percent of the property’s total price. Some keep it as low as possible, as refunds may not always be guaranteed in case the purchase fails.
Due to its status as the capital of Pakistan and its central role in commercial, political, and economic affairs, Islamabad is widely regarded as the safest investment choice in comparison to smaller cities in the country.
Not only is it renowned for its stunning beauty and tranquility, but it also provides a multitude of real estate investment opportunities across various price ranges. As the demand for housing continues to surge, Islamabad stands out as a city that offers countless investment options to cater to the needs of every individual and budget.
Once investors have doubts about the authenticity of an offer and suspect it may be a scam, it is crucial to seek independent legal and financial advice. They should conduct their own research and enquire about relevant details from all the individuals who contact them, including proof of licenses and employment. It is important not to rely solely on information provided by a salesperson.
Seek Help from Investment Experts
Real estate investing for beginners can be very tricky. Scammers and frauds abound, which is why it is not recommended for new investors to venture into the industry by themselves. Moreover, the goal is to earn, not lose or stagnate the invested money.
Legend Properties is here to guide both new and seasoned investors, whether locals or foreigners. The firm is gradually making a name in the industry for specialising in Islamabad properties. We ensure all our clients get the best deals and returns for their hard-earned money. Reach us today!
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Reviewed by:
Experience hones, but constantly embracing learning and versatility is what brings you to the top. I have had several years of experience behind me regarding sales and team management in a handful of prestigious companies in the country, and even so, I yearn for further professional and personal growth; hence, the various trainings and courses I attended. Read More