Under Invoicing in the Residential Real Estate Market in Pakistan

Wahid, Abdul; Mantell, Edmund H.; Mumtaz, Muhammad Zubair

doi:10.3846/ijspm.2021.14337

Cited by 5 publications

(5 citation statements)

References 39 publications

(65 reference statements)

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“…Through web scraping, data on 3,526 houses in Faisalabad were collected from zameen.com and geocoded. These prices serve as approximations, typically 3-5 percent higher than actual transactions (Wahid et al, 2021). While the property listing data does not provide transactional history, it serves as a proxy for market prices (C. Wu et al, 2016).…”

Section: Data and Sourcesmentioning

confidence: 99%

Revisiting Urban Immovable Property Valuation: An Appraisal of Spatial Heterogeneities in Punjab Using Big Data

Khalid,

Zameer

2023

pdr

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This study employed big data and spatial analysis to assess property values in two cities, Lahore and Faisalabad. Traditional housing price models overlook spatial nuances, focusing solely on structural attributes. To address this, we constructed valuation models using ordinary least square regression and Fast Geographic Weighted Regression (FastGWR), implemented through Python and MPI, based on spatial variables. The models explained up to 75 percent of variance in Faisalabad and around 85 percent in Lahore. Factors like floor area, proximity of health facilities, recreational sites, and marketplaces add a premium to prices, while the nearness of educational institutions, worship places, and solid waste transfer stations or dumping sites lessen the property values in both cities. However, the proximity of industrial units and graveyards affects property values negatively in Lahore but positively in Faisalabad. This study highlights the critical significance of spatial factors in urban immovable property appraisal. As a result, it is recommended to integrate these factors into the process of policy formulation and urban planning. 1. INTRODUCTION Pakistan’s real estate market emerges as a potential economic powerhouse, with a substantial portion of the nation’s wealth concentrated within its real estate assets, estimated at 60-70 percent. While the sector contributes around 2 percent to the GDP, the combined impact of housing and construction reaches nearly 9 percent. The value of Pakistan’s real estate sector, evaluated at approximately $700 billion by the Federal Board of Revenue, signifies its economic significance. Impressively, returns on investment can soar beyond 100 percent (Ouattara et al., 2018). However, this promising market is juxtaposed against a backdrop of challenges and disparities. Pakistan’s population, surpassing 225 million, expands annually at a 2.4 percent rate, characterised by an average household size of 6.5 (Pakistan Bureau of Statistics, 2019). With a yearly housing requirement of 700,000 units, merely half of this demand is met, leading to an alarming gap of roughly 10 million units (Rizvi, 2018). This housing shortage necessitates innovative strategies, particularly in the realm of low-cost housing schemes. The intricacies of property valuation further complicate the real estate landscape. Government land acquisitions relying on DC valuation tables often incite public protests due to perceived undervaluation (Sabir et al., 2017). The importance of precise valuation for equitable compensation is underscored by research (Malaitham et al., 2020). Notably, property valuation is not just pivotal for buyers and sellers; it resonates with stakeholders such as investors, banks, agents, and insurers. The geographical location holds substantial influence over a property’s price, further emphasising the necessity for accurate valuation (Mankad, 2021). In dynamically growing cities, the accurate prediction of urban land use evolution plays a pivotal role in fostering sustainable urban planning (Liang et al., 2018) such as Lahore and Faisalabad in Pakistan. Notably, vast untapped potential resides within public properties, including Government Officers Residences (GORs) and railway lands, representing latent avenues for wealth creation. Leveraging these assets effectively can substantially contribute to economic prosperity. The implications of this study extend to policymakers, offering insights to navigate the intricate domains of housing and urban development. A robust housing market stands as a linchpin of a resilient economy; however, Pakistan’s housing sector faces an intricate array of challenges. Urbanisation and migration galvanise demand within urban centers, an issue compounded by insufficient supply catalysed by diverse factors. Shortcomings in land usage, planning, and property rights impede progress, while inadequate revenue collection from property taxes curtails infrastructure financing. The labyrinthine regulations further stall land development, exacerbating housing availability discrepancies, particularly pronounced in megacities like Karachi and Lahore. Notably, housing construction trails behind the meteoric pace of population expansion. Skyrocketing market conditions render housing unattainable for many, channeling them towards informal settlements (Dowall & Ellis, 2009; Haque, 2015; Wani et al., 2020; Yuen & Choi, 2012). The challenges are particularly pronounced within Punjab’s housing markets, accentuated in cities like Lahore and Faisalabad, grappling with deficits in affordable housing (Malik et al., 2020; Wajahat, 2012). A glaring obstacle lies in the hands of speculative investors who control 75 percent of residential plots, perpetuating this complex issue (Zaman & Baloch, 2011). This practice thrives on secure real estate investments and tax loopholes, compounding the predicament. Although plot prices surge significantly (Gul et al., 2018), official valuations lag behind, generating volatility in Pakistan’s property prices. The repercussions of such fluctuations extend to the public, shouldering the burden of investor gains. Despite intermittent housing policies, the issue remains inadequately addressed, emphasising the urgency of public sector interventions to stabilise spiraling prices (Ahmed et al., 2021).

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Section: Data and Sourcesmentioning

confidence: 99%

Revisiting Urban Immovable Property Valuation: An Appraisal of Spatial Heterogeneities in Punjab Using Big Data

Khalid,

Zameer

2023

pdr

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“…Due to the manual nature of property valuation in the country, there is a huge gap in property's actual market value and price determined by the government authorities like the FBR and the Deputy Commissioner (DC) rate of the BoR [103][104][105]. A comparison of market value of the property determined from the online property portal Zameen 1 , FBR 2 , and DC rate 3 in 2022 is given in Figure 4.…”

Section: Financialmentioning

confidence: 99%

Assessing the Status and Challenges of Urban Land Administration Systems Using Framework for Effective Land Administration (FELA): A Case Study in Pakistan

Ahsan

Hussain

Ali

et al. 2023

Land

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The urban land administration system (LAS) of any country serves as a key pillar for good governance, resource planning, service delivery, infrastructure development, and revenue collection. To reform their LASs, countries need a thorough understanding of their existing context and global relevance. The goal of this paper is to examine the status and challenges of urban LASs in Pakistan using the United Nations Framework for Effective Land Administration (FELA). The exploratory case study method used in the paper employs a mixed approach, which includes FELA-based questionnaire surveys, group discussions, and desk reviews. A total of 525 urban LAS stakeholders, including owner-buyers, real estate agents, bankers, lawyers, and LAS organizations, participated in the activity. The results show that more than half of the stakeholders are not satisfied with existing urban LASs, their governance and accountability, laws, and policies. Corruption is prevalent mostly in government organizations. Fraud and joint ownership are the most common sources of dispute, with 67 percent of the respondents stating that the cases take more than two years to resolve in court. The financial aspect of urban LASs is suffering due to property undervaluation and low revenue collection. Manual data and record keeping in LASs further complicate the system, with 87 percent of all respondents interested in innovating the urban LAS using modern technologies. Furthermore, 92 percent of all respondents expressed the need to standardize the existing LASs. There is a lack of capacity and skills, and 89 percent of organizations’ respondents believe that human resources skilled in Geographical Information Systems (GIS) and Remote Sensing (RS) can improve the efficiency of urban LASs. There is a lack of partnership among LAS organizations and a gap in the accessibility of LAS-related quality information. The country’s vision of building smart cities can be realized through LAS standardization and 3D and GIS innovation.

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“…It is observed that there is a significant difference between "DC rates" and market prices of the properties. As DC rates are lower relative to the market price in different housing authorities, most transactions in real estate are based on DC rates [5] (Wahid et al, 2021). However, actual transaction prices are recorded as market prices.…”

Section: Pricing Efficiency Of Real Estate Propertymentioning

confidence: 99%

“…Finally, the government policy vis-à-vis low-interest-rate mortgages for residential real estate in Pakistan provides an incentive as well as an opportunity for mispricing. Inasmuch as mispricing is pervasive, it distorts the incidence of real estate taxes (Wahid et al. , 2021).…”

Section: Introductionmentioning

confidence: 99%

Determinants of the prices of residential properties in Pakistan

Wahid

Kowalewski

Mantell

2022

JPIF

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PurposeThis research aims to identify the statistically significant characteristics of a hedonic model to explain the pricing of residential properties in two cities in Pakistan.Design/methodology/approachThe research methodology applies extreme bounds analysis and the least absolute shrinkage and selection operator. Estimators of efficient pricing were measured via stochastic frontier analysis.Findings The study findings show that the market valuation of residential properties in Islamabad and Rawalpindi is systematically related to numerous factors, including property location, neighborhood characteristics, environmental characteristics, structural characteristics and administrative qualities of local housing societies. The authors also find statistical evidence that suggests that residential estate properties in the two cities are overpriced in the sense that the market transaction prices tend to be higher than the fair prices of the properties in the two cities.Practical implicationsIn Pakistan, the term “real estate” is used rather synonymously with the word “investment.” The findings of this research will help investors to identify the measurable factors that affect the transaction prices of residential real estate. These identifications will facilitate the development of strategic plans toward achieving sustainable rates of return in residential real estate markets.Social implicationsThe residential real estate sector in Pakistan is constantly changing. There are myriad causes for these changes, including changes in social structure, cultural attitudes and technology. Customary methods for forecasting market prices for residential properties have been rendered unreliable because of the dynamics of the market. This study will contribute to the understanding of the changing dynamics of residential real estate pricing.Originality/valueAlthough Pakistan's residential real estate market is growing very rapidly, there is little published research identifying the drivers of this growth. This study covers these aspects to fill the theoretical gap in a real estate context.

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Under Invoicing in the Residential Real Estate Market in Pakistan

Cited by 5 publications

References 39 publications

Revisiting Urban Immovable Property Valuation: An Appraisal of Spatial Heterogeneities in Punjab Using Big Data

Revisiting Urban Immovable Property Valuation: An Appraisal of Spatial Heterogeneities in Punjab Using Big Data

Assessing the Status and Challenges of Urban Land Administration Systems Using Framework for Effective Land Administration (FELA): A Case Study in Pakistan

Determinants of the prices of residential properties in Pakistan

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