One of the major factors that contributed to the current double-digit inflation across the globe was the outbreak of COVID-19. Lockdowns around the globe resulted in an all-time low global GDP. The industry was forced to shut down globally, which resulted in massive losses to economies across the world.
According to the International Monetary Fund (IMF) data, the global economy contracted by 3.1%, triggering an unprecedented economic crisis.
Secondly, just when the pandemic ended and economies started to gain momentum, the war between Russia and Ukraine triggered an energy crisis.
The prices of oil and gas have skyrocketed in the last few months and countries have failed to control the growing economic imbalance.
The import bill has also risen for most countries as they have to pay more due to an increase in energy prices.
Pakistan’s Economic Crisis
According to the Pakistan Bureau of Statistics, inflation in Pakistan surged to 21.3% in July 2022 with the consumer price index (CPI) hitting an all-time low of 175.71%.
Moreover, due to the rise in global oil prices, Pakistan’s trade imbalance has skyrocketed, affecting economic growth at a large.
Several startups and industries across the country have been forced to shut their operations, hitting a massive blow to the already suffering economy.
However, despite all these situations, the real estate sector is the only sector that has performed exceptionally well. Just like all other countries, Pakistan adopted strategies to further boost real estate as it can help in controlling inflation.
According to the Economic Survey of Pakistan 2021-2022, the real estate sector saw a growth of 3.7% with the construction industry performing at 3.1% due to general government spending on construction projects.
Supply Chain Industry
The real estate industry is a catalyst for the entire supply chain and its several components such as:
- Workforce including daily wage laborers
- Plumbers
- Technicians
- Builders
- Engineers
- Surveyors
- Transporters
- Machinery suppliers
The real estate sector also promotes the growth of several allied industries, for instance, the construction industry.
The Role of Real Estate in Boosting Business Sector Growth
The real estate industry is not just limited to constructing houses for sale and buildings; communication networks, paved roads, railway lines, economic hubs, ports, and residential and commercial areas – are all part of real estate projects.
Real estate represents the economic infrastructure and builds a bridge between several sectors. It allows these industries to grow in collaboration and play a vital role in the country’s economy.
The following are some ways through which real estate can play its role in economic growth:
- Expanding domestic industry and goods production
- Producing jobs in several sectors
- Boosting the construction machinery industry
- Attracting foreign investments
- Boosting the tourism industry
Expanding Domestic Industry and Goods Production
According to the Economic Survey of Pakistan 2021-2022, “iron & steel production jumped by 16.5% during the period under review against the contraction of 8.6% in the same period last year.
Billets/ingots, mainly used in the construction industry, grew by 32.8% and HR/CR sheets/strips/coils/plates increased by 7.9%. Both reflect the growth momentum in automobile and construction-allied sectors.”
Producing Jobs in Several Sectors
The construction industry, one of the largest contributors to the GDP, produces thousands of employment opportunities yearly.
According to the Economic Survey of Pakistan 2021-2022, “the share of employment in the construction sector has increased from 8.0% in FY2019 to 9.5% in FY2021”.
Moreover, the Labour Force Survey 2020-21 indicated that employment in the construction sector reached 6.4 million compared to 5.13 million in 2018-19, showing an increase of 1.28 million.
Therefore, the real estate and construction sectors will play an important role in 2022 in boosting business growth. Government should adopt policies that can help the sector gain momentum.
Boosting the Construction Machinery Industry
Due to large-scale construction projects across the country, the construction equipment market has grown in the past few years.
The Pakistan Construction Industry Association (PSIA) also promotes local machinery manufacturers on international platforms to boost exports. Moreover, local machinery production has removed the import bills.
Attracting Foreign Direct Investments
Real estate is one of the best ways to attract foreign direct investment. According to the SBP (State Bank of Pakistan) data, “the net FDI in the construction sector stood at $79.4 million during FY22 against $155.4 million during FY21”.
The political instability in the country has affected investment in Pakistan over the years. However, the previous government’s steps helped the country attract record foreign direct investments (FDI).
Projects such as ‘Bundal Island’ and ‘Ravi Riverfront Development Project’ were introduced, and several investors expressed their interest in investing around $50+ billion in Pakistan’s real estate. Currently, several residential and commercial projects across the country have attracted several foreign investors.
Boosting the Tourism Industry
Pakistan’s real estate can also play its part in boosting the tourism sector. Better infrastructure attracts local and international tourists.
Therefore, by boosting the real estate sector and introducing new policies, Pakistan can expand the domestic goods and machinery production industry and build state-of-the-art infrastructure to impact the GDP positively.
