Anyone who bought property during the bloody carnage in Pakistan’s biggest city over the past few years is now cashing in.
Property prices are growing faster in Karachi than in any other major Pakistani city this year as the streets become safer following a security blitz that began in September 2013. Police have counted 68 murder-free days from August 2014 until early December, and the average number of daily killings has dropped to four from about seven.
“Karachi’s market, especially, has us on the edge of our seats,” said Zeeshan Ali Khan, chief executive officer of Zameen.com, which claims to run Pakistan’s largest property website. Sales have “grazed peak after peak” following the security operation, he said.
The safer streets reflect efforts by Pakistani authorities to clamp down on terrorism and organized crime that has deterred investment. More commerce in one of the world’s fastest-growing megacities will also help the national economy: Karachi generates about half of Pakistan’s tax revenue and is home to the country’s stock exchange and central bank.
“Now people have hope things will get better, and Karachi is the place they should be investing,” Arif Habib, chairman of Karachi-based conglomerate Arif Habib group, said in a Dec. 7 interview. “One year ago people were concerned to invest in their businesses in such a situation, or even expand.”
22 Percent Jump
Average property prices in Karachi increased 22 percent to 7,234 rupees ($70) per square foot in October compared with a year earlier, according to Zameen.com. By contrast, real estate prices rose 14 percent in Lahore and fell 5.5 percent in Islamabad, the capital.
A reduction in extortion is helping to drive demand in middle-class neighborhoods of Karachi, according to Faraz Arif, head of research and marketing at Arif Habib Dolmen REIT Management Ltd. Previously, some potential buyers would have to pay about 20 percent of the purchase price to gangs in cash, he said.
“For them the difference is significant," Arif said in an interview. “Now those people are more confident.”
Pakistan’s economy is forecast to expand 5.5 percent, the most in nine years, as Prime Minister Nawaz Sharif and a more assertive army chief take steps to tackle power shortages and Islamic militancy that have held back growth. His government is also seeking to narrow the fiscal deficit and sell stakes in state-run companies to meet conditions on a $6.6 billion International Monetary Fund loan.
Better security in Karachi is key to Pakistan’s long-term growth prospects. The city once served as the base for Khalid Sheikh Mohammed, the self-proclaimed mastermind of the Sept. 11, 2001, attacks in New York. Wall Street Journal reporter Daniel Pearl was murdered here in 2002. More than 13,000 people were killed in Karachi since January 2011 — almost double the number of U.S. military personnel that died in the Iraq and Afghan wars.
While Nawaz Sharif’s government authorized the police in Karachi and paramilitary forces to clean up the city, much of the credit for the improved security has gone to army chief Raheel Sharif, no relation to the prime minister.
Since Taliban militants killed more than 130 students at a military school last December, the military has stepped up a campaign to flush them out of areas along the Afghan border. In Karachi, authorities have also gone after criminal gangs and political parties in a bid to stop turf wars that fomented the violence.
Muttahida Qaumi Movement, Karachi’s biggest political party known as MQM, has accused security forces of targeting its members instead of militant groups like the Taliban and Islamic State.
“The operation should be focused on them," said Aminul Haq, an MQM spokesman. He added that his party was the first to support the crackdown and fully respects the army, paramilitary forces and police.
Despite the recent property price surge, the outlook remains mixed. Some more affluent members of Karachi are investing in real estate because tougher enforcement of tax laws is making it harder to move money overseas, Arif said. The price surge may subside when the “real buyer has been priced out,” he said.
The security situation also remains perilous. Many areas of Karachi are considered off limits to foreigners and reprisal attacks are still common, including the killing of two military police on Dec. 1. While four murders a day is an improvement for Karachi, it’s still four times more than New York City.
All in all, however, the mood is much more optimistic than a year ago. Consumers spent 70 billion rupees during the Muslim holiday season of Eid in June and July this year — about 40 percent more than last year and nearly triple the amount spent in 2013, according to Atiq Mir, chairman All Karachi Tajir Ittehad, which represents more than 400 trade groups in the city.
“Now we see people making investments — stocks piling in shops, in go-downs, factories are running,” Mir said. “We want this operation to continue."