Foreign Direct Investment in Real Estate Sector Declined in FY22

The net foreign direct investment (FDI) in the real estate sector of the country saw a decline during the fiscal year 2021-22 (FY22), according to a document compiled by the State Bank of Pakistan (SBP).

The document reveals that net FDI in the real estate sector decreased by $6 million during FY22. The outflows were recorded at $9.3 million against the inflows of $3.3 million during the said period.

The document also shed a light on the performance of the construction sector during the last year. The net FDI in the construction sector stood at $79.4 million during FY22 against $155.4 million during FY21. The inflows were recorded at $87.7 million, while outflows of $8.3 million were witnessed during FY22.

The net FDI in these sectors saw a decline even though the government has launched different real estate projects to provide affordable housing to the middle and lower middle class. Some of these projects include Naya Pakistan Housing Scheme, Mera Pakistan Mera Ghar, etc. According to a PIDE study, Pakistan currently has a backlog of about 10.3 million housing units.

Former Chairman of the Association of Builders and Developers (ABAD) Arif Jeewa, while commenting on the development told ProPakistani that there are different reasons for the reduction in FDI in the real estate sector. He said that the overall hyperinflation in the country and the increase in the cost of materials during the last two years have created difficulties for the real estate sector. The government has also increased tax rates on real estate which ultimately triggered the situation.

He further stated that the policy discount rate has been increased to 15 percent, which is also discouraging investment in the real estate sector.

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