In recent years, an increasing number of Pakistani American workers are looking to retire in Pakistan. This… [+] In this October 2, 2013 photo, a Pakistani resident stands near a replica of the Statue of Liberty in Bahria Town, a private development in Rawalpindi. Unlike Pakistan’s major cities, which have been riven by an unprecedented wave of killings and kidnappings, the private development of Bahria offers elite and emerging middle-class Pakistanis a residential oasis protected from militant attacks and power outages. AFP PHOTO/Farooq NAEEM (Photo by FAROOQ NAEEM/AFP via Getty Images)
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By Saba Fatima
A growing number of Pakistani American workers are considering investing and buying retirement homes in their ancestral South Asian homeland.
Homeownership rates are declining slightly, according to the National Association of Home Builders. Given these challenges to homeownership, many Pakistani American workers are looking to invest in the South Asian real estate sector, which is projected to reach a value of US$2.11 trillion this year.
Despite all the challenges, South Asia remains one of the regions with the highest ownership rates. Pakistan accounts for just 2% of global property ownership share, with India and Nepal also accounting for large percentages. Culturally, home ownership remains important.
“It’s natural for Pakistani Americans to want to invest and buy real estate in Pakistan and within the Pakistani real estate market, and workers need to be able to adapt to this,” said Tayyaba Rizwan, a real estate and technology analyst. “This is the future of work in real estate: finding global opportunities for liquid capital.”
Investing in South Asia remains attractive for expatriates given their high purchasing power. According to 2021 Pew Research Center data, South Asians make up 5.5 million of the U.S. population, but are the highest-earning minority and account for 29% of Asian immigrant purchasing power in the U.S. Another example of this demographic’s purchasing power in the U.S. is the explosive growth of sports.
Cricket is extremely popular in South Asia and is the fastest growing team sport in the United States after rugby. With the recent hosting of the T20 Cricket World Cup in the United States, the sport has received increasing attention from mainstream media.
Cheering on cricket teams and listening to music cements connections between continents. In Pakistan especially, real estate companies are hoping to attract wealthy expatriates from abroad. For example, Broadway City Gwadar, a community under development in Pakistan’s Balochistan province, is promoting its product through slick roadshows in the UK and elsewhere. In Islamabad, another real estate development, Eighteen, is also being developed to the standards many associate with Dubai.
Other new developments such as Bahria Town, which features a miniature Eiffel Tower and Statue of Liberty, are clearly an effort to appeal to such expats.These housing societies in the real estate sector become even more attractive to expats due to their higher purchasing power.
Although South Asians make up 5.5 million of the U.S. population, they are the highest-earning minority group and account for 29% of Asian immigrants’ purchasing power in the U.S., according to 2021 data from the Pew Research Center.
However, despite being an attractive investment option for affluent expats with purchasing power, it is important to recognise the serious challenges the real estate sector faces as a result of political instability and economic pressures in Pakistan. Limited access to housing finance, high interest rates and a complex legal framework are hindering the growth of the sector.
This challenge is further exacerbated by a widespread lack of understanding of mortgage products, a stringent regulatory environment, and a dearth of financial products that cater to diverse income brackets.
“Pakistan is certainly not the only country that has been plagued by inflation, slowing GDP growth and high interest rates over the past decade, putting further strain on an already fragile banking sector. Similar economic challenges are faced by countries across the world,” said Malik Riaz, chairman of Bahria Town and a Pakistani real estate executive and entrepreneur.
Pakistani expatriate construction workers playing cricket during a break from work. [+] A construction site in Dubai, United Arab Emirates, December 3, 2007. A workforce of mostly Pakistani and Indian workers has transformed Dubai in recent years into a futuristic city with the world’s tallest buildings. Now, many wealthy Pakistanis aspire to live in similar developments in their own country. (Photo: Chris Jackson/Getty Images)
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For real estate investors, significant challenges have become evident as a result of ongoing political instability alongside the economic situation.
“The real estate sector is worth about USD 1 trillion and accounts for about 2.5% of the country’s GDP, making it a significant portion that cannot be ignored,” Riaz said. “Pakistan’s real estate market is currently undergoing a transformation. And just as this transformation will not happen overnight, it is expected to have a lasting impact not only on the real estate sector but on the country as a whole.”
Though the square footage is much smaller than in the U.S., large, multi-bedroom homes can be had for under $100,000. This, along with a low cost of living, makes Pakistan attractive, and the country’s once-notorious security situation is improving.
Of course, American investors may not find a supportive environment for international companies to operate in Pakistan. Corruption and injustice discourage foreign investment. Pakistan ranks 133rd out of 180 countries in Transparency International’s annual corruption rankings.
Riaz said politically motivated persecution was an “open secret” in Pakistan and that his association with former prime minister Imran Khan had made him the target of a media and legal campaign aimed at tarnishing his image.
“As a result, Bahria Town stakeholders, including myself, our shareholders and our families, have been wrongfully accused of illegal activities. It is pertinent to point out that these charges have not been verified by the judicial system yet a media campaign was launched against us,” Riaz said.
The problem of inflation
Inflation is an issue for American workers and is becoming an issue globally as well. High taxes and inflation remain major challenges for Pakistani real estate investors. Pakistan’s real estate market is characterized by moderate rental yields of 5-6% and transaction costs around 6%, but high corporate tax rates of 29% and real estate tax rates of 5% make it somewhat less attractive and deter companies and long-term investors from entering the market.
The International Monetary Fund (IMF) also places great importance on real estate capital gains and recommends ensuring proper recording of property sales as well as taxing capital gains annually.
“Inflation is a persistent economic challenge affecting various sectors including real estate. In Pakistan, the real estate market is highly affected by inflationary pressures, leading to higher property prices and lower profit margins for investors and developers,” Imrat Institute for Policy Research said in a recent report.
But on the other hand, the positive impact of AI is bringing about major changes in Pakistan’s real estate market, mirroring its impact on the global stage.
“I’m not as active in the real estate industry as I used to be because I’m as concerned as everyone is about how AI will impact the future of work,” Rizwan says, “but I still think people are going to want that human touch when buying a home, no matter where it is.”
Despite all the challenges, Pakistan’s real estate market is booming as a number of housing projects aimed at the wealthy (often foreign buyers) continue to grow. However, it is worth noting that due to the significant time difference, Pakistan is unlikely to develop as a significant relocation destination for remote workers.
However, the economic potential of this sector can be maximized if the government steps in through workable policies that benefit real estate investors. For American workers considering investing in Pakistan, patience may be the key.
