Real Estate Market Review 2024 & Investment Outlook for 2025

Challenges of 2024 & Investment Prospects for 2025

The year 2024 proved to be one of the most challenging periods for Pakistan’s real estate sector. Economic and political instability, coupled with high inflation, record-breaking interest rates, and stringent tax policies, led to a downturn in the market. While several new projects were introduced, only a handful gained traction among investors. Many businesses shut down, and numerous real estate developments came to a halt. Despite these difficulties, the hope for a more stable and prosperous 2025 remains strong.

The decline in the real estate sector did not begin in 2024, but this year exacerbated the existing challenges. The absence of strict government regulations led to widespread malpractices, property frauds, and significant losses for ordinary buyers. However, tough times often bring valuable lessons, allowing for strategic adjustments. This article examines the performance of the real estate market in 2024, the factors behind its struggles, and the investment opportunities that lie ahead in 2025.

Market Performance in 2024

At the beginning of 2024, some optimism surrounded the market due to the upcoming general elections on February 8. A temporary increase in real estate activity was observed in January, but post-election instability and economic turbulence led to further decline. The real estate sector, already under pressure, faced additional setbacks.

Established housing schemes such as DHA, Bahria Town, Multi Gardens, and Top City-1 experienced significantly reduced transaction volumes, leading to price depreciation. Meanwhile, speculative projects that relied on file-based sales—including New Metro City, Nova City, Rudn Enclave, Capital Smart City, Kingdom Valley, and Blue World City—saw a drastic drop in value, with price declines of 30% to 70%. Even in reputable housing societies, buyers remained hesitant due to uncertainty in the market.

Investment in new projects became increasingly difficult as investors lost confidence. Compared to 2023, property prices in developed societies dropped by approximately 20% to 30%, while file-based investments experienced a steep decline of 50% to 70%.

The market for under-construction residential and commercial projects also weakened due to investor mistrust in developers, mainly because of multiple rental scams. However, completed apartments and commercial shops performed relatively better, driven by demand from genuine buyers with limited budgets.

Also Read: State Bank of Pakistan to Introduce New Currency Notes in 2025

Factors Contributing to the Market Decline

Several internal and external factors contributed to the downturn of Pakistan’s real estate market in 2024. Below are the primary reasons:

1. Political Instability

Post-election turmoil led to uncertainty and social unrest. In such conditions, investors tend to hold back their funds rather than commit to long-term property investments.

2. High Inflation

The rising cost of living reduced household savings, leaving potential investors with limited disposable income for real estate investments.

3. High Interest Rates

With interest rates peaking at 22%, many investors preferred depositing money in banks instead of investing in real estate.

4. Economic Instability

The overall economic slowdown, rising costs, business closures, and unemployment reduced liquidity in the market, further dampening property investment.

5. Property Frauds & Scams

Many developers lured investors with false promises of high monthly returns. When these projects failed, investors faced massive financial losses, especially overseas buyers who were heavily affected by such scams.

6. Oversupply of Files

Housing societies continued to sell far more plot files than the available land. This oversupply caused prices to crash when demand declined, leaving buyers with depreciating assets.

7. Currency Depreciation

Overseas Pakistanis, who form a large portion of real estate investors, faced heavy losses due to currency fluctuations. Although the Pakistani Rupee stabilized later in 2024, investor confidence remained shaken.

8. High Property Taxes

New taxation policies—including a 3% withholding tax, 3% Federal Excise Duty (FED), and additional stamp duties—made real estate transactions more expensive, discouraging buyers.

9. Reluctance of Overseas Pakistanis

Previously, overseas Pakistanis played a key role in real estate investments. However, political instability, frauds, and high taxation reduced their interest in Pakistan’s property market.

10. Market Correction

Between 2020 and 2022, property values surged by 200% to 500% in certain areas. However, speculative investments led to inflated prices. The correction phase began in early 2023 and continued through 2024, significantly impacting speculative file-based investments.

Investment Prospects for 2025

Despite the setbacks of 2024, there are reasons to remain optimistic about 2025. Several factors indicate that Pakistan’s real estate market may stabilize and gradually recover:

1. Economic Stability

Economic indicators suggest improvements, with inflation decreasing and interest rates lowering. The government is also considering incentive packages and tax reductions for the real estate sector, which could attract fresh investment.

2. Political Stabilization

As the political landscape settles, investors will feel more confident in making real estate transactions.

3. Declining Interest Rates

Interest rates have already dropped to 13%, with further cuts expected. Lower returns on bank deposits may encourage investors to return to real estate.

4. Stock Market Volatility

The Pakistan Stock Exchange saw record growth in 2024, but concerns about a potential correction may push investors toward safer options such as real estate.

Investment Guidelines for 2025

To make informed decisions in 2025, investors should adopt a cautious approach and consider the following guidelines:

1. Invest in Government-Backed Projects

Schemes approved by CDA, LDA, KDA, and other government authorities are generally more secure than private projects. Though they may face delays, they hold long-term investment value.

2. Choose Reputable Developers

Investing in established developers like DHA and Bahria Town is safer, as these projects have a proven track record and maintain high development standards.

3. Avoid Blind Investments

Don’t invest simply based on social media promotions or recommendations from friends. Always conduct thorough research, verify legal approvals, and cross-check market rates before investing.

4. Prioritize Physical Properties Over Files

Invest in plots or properties that physically exist and are legally approved rather than speculative file-based investments.

5. Consider Ready-Built Properties

With construction costs rising, built-up houses, apartments, and commercial properties in established areas provide better stability and growth potential.

6. Invest in Commercial Spaces in Malls

Purchasing shops in reputable malls is a safe investment that offers both appreciation and rental income over time.

Conclusion

Pakistan’s real estate sector faced severe challenges in 2024 due to political uncertainty, economic hardships, and regulatory weaknesses. However, with improving economic indicators, tax incentives, and declining interest rates, 2025 holds promise for recovery. Investors should exercise due diligence, focus on reputable and government-approved projects, and avoid high-risk speculative investments. By adopting a strategic approach, they can capitalize on emerging opportunities and navigate the evolving real estate landscape successfully.