By: Z. Ahmad , Lahore - 25 Dec 2013
Every investment opportunity has its own risks, whether its stock market, commodities, foreign currency or real estate sector. These investment sectors have seen its ups and downs many times in Pakistan. But perhaps the most important lesson and wisdom always seem lost somewhere.
It is an established understanding that the common person is not fully aware of the investment opportunities and doesn’t know well how to make ‘money from money’ successfully and efficiently. And why should he be concerned? He usually has meager resources and he is mostly concerned about meeting his own daily needs.
But the problem starts when he gets carried away with the market trends and starts listening to those people who lure him into what it seems to be the ‘right things to do’ at that time.
Pakistan has also seen many such cyclic trends. Many people have made lots of money and many people at the same time have lost their lifetime savings. So in a philosophic way, we can say that every boom has its own falls hidden beneath. It may mean ‘profit’ for someone and ‘loss’ for someone else at the same time.
One question remains floating in every mind; who are those who make money and who are those who lose money? The answer is simple; the money makers are the big investors who are always ahead of the market trends or even create such trends and those who lose money are the common people who do not know the basic skills of investing.
Financial investments should always be based on rationale decisions supported with solid analysis and projections. It is not for the faint hearted or emotional people who should just get carried away eventually losing money.
Recent example in Pakistan is in ‘foreign currency investment’ especially in US dollars. With the arrival of new government, the dollar started appreciating from Rs.99 onwards. The rumour mill also was on hyper mode spilling out the projections of Rs.120+ future value of dollar. It is hard to understand for common people ‘who are the people behind generating these false rumours’ and what are the factors contributing towards the escalation of the US dollar value. In short it is a mix of many factors - economic factors as well as some vested interests.
The real estate sector after about 4 years of recessionary slump from 2007 – 2010, started gaining its momentum in 2011. It again picked up its peak in mid 2013. This resulted in almost 60-100% gains in just 2 years time which definitely is very impressive by investment standards. No other business usually provides such great returns. The average returns on any business whether its manufacturing, restaurant, trading, or technology would range from 15 to 40%.
The real estate investment has its two sides, both positive. In deeper reality the amount of investment never goes waste. You always have a piece of land with you even if the prices come down for temporary period. This piece of land cannot be taken away from you and you can always hold it with you.
Real Estate is always considered comparatively safe investment in both bullish and bearish times because of its tangible asset value attached to it irrespective of its present value.
As far as the currency trading its concerned, the average gains are always less than the real estate sector. For an example, if US dollars gained 10% in six month from Rs. 100 to 110, so as per the annualized projections it would eventually show total of 20% after a year reaching at Rs. 120 which is considered an average return in any business venture.
Pakistan currently has just started showing positive economic outlook. Government is making all out efforts in managing the law and order and security situation. In this context, the recent joint meeting between DGMOS of Pakistan and India is a welcome sign to ease the border tensions as well as for confidence building between the two nations. The arrival of Turkish Prime Minister in Pakistan is another welcome sign for the economic outlook of Pakistan. The easing of Iran relations with US also goes in favour of Pakistan. The Chinese investments in Gwadar Port and Karachi nuclear plant also show positive economic developments.
These milestones get converted into positive sentiments for the financial and investment markets. The stock markets improve and the other investment sectors also improve. The investors present inside and outside of Pakistan start gaining confidence.
The dangerous and risky investments are those which usually flourish on speculation and only for short run, which clear is an indicator that some other dark side of mafia is controlling it.
The real estate sector in Pakistan is now going through the stability phase. This sector has lots of investment potential for Pakistanis living within or outside of the country. The recent investments by Bahria Town in Karachi, the expansion of DHA Karachi by launching its huge DHA City Project, the expansion of DHA Lahore with Phase 9 with more than 40,000 kanals of land, are just some of the projects which clearly show the confidence of people in such projects and especially from the credible developers like DHA & Bahria Town who have already delivered some of the best projects in real estate for Pakistan.
In a recent study done by one of the leading and reliable real estate web portal Zameen.com in Oct 2013, they have clearly indicated the growth trends in real estate sector, which now is an indicator of potential promising returns and rewards in the coming years. They have also indicated the preference trend by the investors in Pakistan and abroad towards the Lahore real estate market which has picked up fast and has gained local and global investors’ confidence.
I guess the time of real estate stability has arrived after a long time in Pakistan. Investment in real estate helps in many ways. It helps to grow your personal asset; it helps to contribute towards national economy and it helps to develop Pakistan with tangible results. The invisible investments in currency and stock markets may not be for the common people and not necessarily for those prudent investors in Pakistan and overseas who want to have secure assets back at home with stable incremental investment growth. It is high time to use of the wisdom of the times and act logically.
By: Z. Ahmad