Pakistan's property crash makes room for real estate that earns rent

Why he changed his tone on property

Muzamil opens with a contradiction viewers had noticed. For years he called Pakistani real estate a pump and dump, an unproductive place to put money. In his previous video, he said this was the best time to buy. Which is it?

He also addresses a recent Instagram post. For the first time, he did a paid partnership with a real estate developer, one focused on tourism. He says he usually turns such offers down. This time, he asked for the business case, the numbers and the data before he agreed. Some commenters accused him of selling out. This episode is his answer.

Two kinds of real estate

His answer rests on one distinction. The first kind is productive real estate: housing, commercial property and hospitality. People live in it, run shops and factories from it, and stay in its hotels and eat in its restaurants. Tourism cannot work without it. When you invest in this kind, you are investing in a business case with a return you can earn regularly.

The second kind became popular in Pakistan over the last 20 years. It has nothing to do with productivity. You buy a plot or a file, hold it, and hope it pays off in two to eight years “like a prize bond or a lottery.” In Muzamil’s account, housing schemes sold files before they owned land, used that money to acquire land, and cut it into plots. Prices rose so much between file and possession that a gold rush spread across the country. Many housing societies appeared. Most involved little construction, only the cutting of plots.

Why the file trade was a pump and dump

The problem, Muzamil argues, is that money moved from hand to hand without creating anything. A farm grows fruit that can be sold. That is new wealth. A plot bought for 1 lakh and sold for 5, then 8, then 16, creates none. He compares it to gambling: many people pool money, and a few walk away with it.

He explains why the illusion lasted. Winners told everyone how they doubled their money. Losers stayed quiet, often embarrassed. “The story of the losers does not reach you, and the story of the winners is in your ear,” he says. So more money kept flowing in. Any market disconnected from fundamentals, in his view, ends the same way. Money pours in, prices climb, and then it crashes and looks for stability. Over the last one to two years, he says, that crash has arrived.

He adds that almost nobody did the accounting. A salesman would say a bridge was coming or a ballot was due, and buyers trusted connections. “Nobody really sits down and looks at the investment” in terms of return, he says.

Where real demand comes from

Underneath the speculation, Muzamil sees genuine demand. He cites the World Bank figure that Pakistan needs 10 million new housing units. Several forces drive it. People have moved quickly from villages to cities over the last 20 to 30 years. Expectations of a home have changed. And families are changing shape. The joint family, with several brothers, their wives and children living with their parents, is slowly giving way to nuclear families of a couple and their children.

Young Pakistanis also aspire to different homes. Their elders worked all their lives to buy one plot for the whole family. Today’s young people, raised on YouTube, want a home of their own as early as possible. Builders, he says, are still selling 10 marla, one-kanal and two-kanal houses to buyers near retirement.

The modern buyer, in his view, is in their 30s or early 40s. Many are overseas Pakistanis in the Gulf who want a proper city home for their families. The other group he highlights is freelancers and remote workers earning in dollars. He estimates there are about 50,000 to 60,000 people in Pakistan in their early 30s earning 5,000 to 10,000 dollars a month. If one of them saves 3,000 dollars a month, that is about 8 to 8.25 lakh rupees, or close to 1 crore a year. Within two to two and a half years, such a person can afford a good small home. “This market has just started,” he says.

These buyers want different things. They are not thinking about resale in 30 years. They plan to live in the home for 30 years, so they want good design, maximum space and perhaps a home office.

The tourism math

Tourism is his clearest case of productive demand. A family that drives ten hours to the northern areas needs somewhere to stay, eat and spend time. He shares data he says came from the KP government and from the developer he partnered with. About 40 lakh people visit the Galiyat, places such as Nathia Gali and Dunga Gali, during the 90-day summer season. About 2,400 rooms are available for them.

He works it through. Even with eight people to a room, 40 lakh visitors means about 5 lakh room stays. Spread evenly over 90 days, that is about 5,500 rooms needed each day, against 2,400 available. “Basic economics,” he says: demand is far above supply, and it should grow as the population grows and people travel more.

He also explains how he would judge such a project. Find the building cost, the usual room rate for similar properties, and their occupancy across the year. Multiply rate by occupancy, divide by your investment, and you have the share of your money you earn back each year. Ask the developer for the research, the gross revenue, maintenance costs and property management fees, and the net income after all of that. “Purely a problem-solving productive business,” he says, even though it is real estate.

Rents were too low for prices

Muzamil puts the core imbalance in one number. Residential property in Pakistan returned about 2% a year in rent. Comparable Asian economies, he says, average 5 to 7%. His example is a 5 crore home renting for 70,000 to 80,000 rupees a month. At 80,000, that is 9.6 lakh a year, or about 1.92%. In his reading, this showed property was overpriced, because land prices had been pumped so high that renting out a finished home made little sense.

He does not expect prices to collapse to match. Most people who paid 5 crore will hold rather than sell for 3. Instead, he expects rents to catch up, slowly rising until a 5 crore home rents for around 2 lakh a month, close to the 5% regional average. As taxes bite and the market slows, he expects rental yields to climb to the point where buying a rental property makes more sense than holding a file or an empty plot.

Why now, and what to buy

His case for buying now is that prices are lowest when investor confidence is shattered. He sees two protections in productive property. A finished building contains iron, steel and cement, whose prices rise with inflation, so it tends to hold its value as the rupee falls. Empty land, he argues, “is running on air,” with no reliable way to value it. And as freelancers and young families enter the market, demand for homes, and so rents and prices, should rise.

“The pump of the last two years has largely deflated,” he says, and prices have normalised a lot. His suggestions follow from his analysis. Look at tourism or commercial property. In housing, look first at apartments, which suit smaller middle-class families. Otherwise, choose 3, 5 or 8 marla homes, either built or ready to build on, over one- and two-kanal plots that he calls a hobby of the rich. He estimates the sweet spot for buyers at about 90,000 to 125,000 dollars, or roughly 2.5 to 3.25 crore rupees. He promises a fuller video on real estate accounting.

A message to builders

Muzamil ends with a request to developers. Stop doing land deals and start thinking about buildings and homes. Change the design language and the marketing. Sell to the 30 to 40 year old buyer instead of the 50 to 55 year old. Older buyers, he says, only cared about resale and saw a swimming pool as wasted money. Younger buyers want communities: a pool, a community centre, a place to gather. These extras, he argues, add genuine value for them.

He invites viewers to tell him how they live and what they want as consumers. Do they live in a joint or nuclear family? Do they travel in Pakistan, and are the hotels good enough? Would they choose a large farmhouse, or a well-designed 5 marla home with smart technology and every inch used? He closes by saying his views could be right or wrong, and asks viewers to correct him where they disagree.