Irrational Exuberance – Gambling on Pakistani property market

Malik Sahib,
Very good article, I was thinking about writing on it myself W.R.T Punjab, India.
My family owns around 50 acres of agricultural land near Chandigarh, Punjab. 12 years ago one acre used to sell for 1 lakh Rs and it was considered a very high price. Last week my father called me and said that same land is being sold for 50-60 lakh Rs and the builders are putting pressure on him to sell it and he would like me to come and manage it for him.

I was flabbergasted, that means prices of one acre lot is $125,000 in Punjab that is almost same as in New England. How could it be? Yes, India has made tremendous progress but when you drive around in India it does not compare with Boston or New England.
Then howcome price of land is same.

I don`t know how could Indians afford a house for 3-4 crores( 800-900000 USD). BTW, all of these transactions are what they call black money, official price is not even 10th of the sold price. Is that how it is in Pakistan?
Government is not making much money in these txns than the realtors.

Something is not right, it will self-correct itself. I am putting my dreams of buying a house in North Eastern USA on hold for now.

Everything, and not just property prices, has been inflated beyond imagination. A plate of Seekh Kabab (containing 6 Pcs) is now Rs 90. I recall paying 2 Rs for Two Kababs, One Naan and loads of Chutney. Same goes for everything else. A Honda 70 motor cycle in 1981 was like Rs 7-8000, now it is close to a 100,000. Even Tibet Snow cream is now 50 times the price it was some 10 years ago, and not to mention the price of Bal-Safa powder. One can see why some people have stopped using it.

Mehngai is killing everyone except for the few very very rich people.

Malik Sahib, thanks for your insight, and I hope that, as you predict in your model, that this bubble blows with a big bang. Makes me sick to see how a diabetic woman whose only income is the pension from her dead husband cannot even afford insulin shots. Sickening.

dilliwale bhai..50lakh a acre near Chandigarh? dude sell me one if true. That is the price per acre outside Moga these days..chandigarh te phir vi capital ay.

Real estate appreciation in last decade has been unbelieveable in most places. There are places in California that appreciated 40% last year and about the same previous year. is that insame or what!! Some idiotic buyers jumped into this market 2/3 years ago and have made tones of money just buying one or two homes....more than they could have made in their entire lives...while wise ones kept eye balling when the crash is going to happen. I know dozens of smart ones and trained financial and technical gurus who feel so stupid these days that they don`t want to talk about real estate at all because it makes them feel bad. On the other hand I know a few truckers and cabbies when meet talk about when and how they are going to retire in their early 50`s.
makes your head spin when you think about it.

My wife has been pushing me to buy some investment property for 4 years...which we could have easily but listening to the wise ones I did not....but now I feel stupid even thinking about it:-) and she got a excuse to now and then question my sanity.:-)

But...prices has gone so stupidly high now that people in other parts of the country don`t believe it when we tell them the numbers....few months back a relative woman from midwest came to visit....by looking at our house size she figured out our financial condition is not that well...kept praising how big his daughter`s house is in some god forsaken place.....I let her feel good..kept smiling:-)

here is some info about california markets:

$300,000 will buy you a 700 sq ft 1 bedroom/1 bath condo with a carport

$500,000 will buy you a 1100 sq ft 2 bedroom/1-1/2 bath condo with 1 or 2 car garage

$700,000 will buy you a 3 bedroom, 2 bath single story home

$900,000 will buy you a 4 bedroom, 2-1/2 bath, 2 car garage two story home.

Any of the above ones you don`t invite people you still want to be friends or relatives with.

Anything you want to be proud of and show your relatives: more than $1.4 million.

Re: # 2
Same thing here. One patta of Gol Guppay and Paani Poori used to cost Rs 2, now same Bihari wants Rs 50, only difference is that he has a cellphone and wears Pant-shirt now.

Last time I went to Delhi, I decided to show to my wife where I used to eat Cholley Bhaturey near Delhi Cantt, this guy used to sell for Rs 1.25 (one nice Makhani Kulcha and Amritsari Cholley), now same S.O.B wanted Rs 20.

Kiya Zamana aa gya hai.

Re: # 2
Same thing here. One patta of Gol Guppay and Paani Poori used to cost Rs 2, now same Bihari wants Rs 50, only difference is that he has a cellphone and wears Pant-shirt now.

Last time I went to Delhi, I decided to show to my wife where I used to eat Cholley Bhaturey near Delhi Cantt, this guy used to sell for Rs 1.25 (one nice Makhani Kulcha and Amritsari Cholley), now same S.O.B wanted Rs 20.

Kiya Zamana aa gya hai.

kulharee: sheekh kababs are naan are ok...you can always import from Amritsar but you can`t import you house from their:-)

Re: # 3
Gull te tussey theek hi kehende ho.
I am in the same boat, I bought a house in Boston and lived in it for 6 months, sold it for a profit of $30,000. Now I am living in big apple, paying $1800 for rent waiting for bubble to burst.

Dullay, I think it will definitely see some correction, wait(I am not a wise man) but certainly sees the shift. There is no way property prices can go on increasing where incomes are going down. On the whole country is heading south as far as economy is concerned.
Wait for another 1-2 yrs. You will see defintely see correction, when the banks start foreclosing.

yeah I see that already happening....particularly over a million dollar homes have slowed down....days on the market is going up like 25 or 30 days...unheard of last year...they used to sell same day or same week.

I know of Boston market(west/south area) as I still follow it.
Last year in Oct there were 250 houses for sale under 1 mill and avg time was 30 days.
This month there are 750 houses for sale under 1 mill and avg time is 7 months.

Price has`nt fallen yet but wait another 6 months, people will freak out and start lwoering the price, not to mention the skyrocket property tax that will stay where it is.

#9 by delhiwala on September 27, 2005 12:42pm PT


Price has`nt fallen yet but wait another 6 months,


they have in the DC area...million $ houses are a poor gauge...people who have million $ homes were already paying a ton of money...they are probably well off and there is no pressure to lower the house price even if it doesn`t sell..in addition, million $$ homes are usually at a premium for location or other things(swimming pool)..There`s always going to be people who`ll upgrade to those houses...

I am so poor, I am considering pitching a tent in a friend’s backyard?

It sucks to be poor.

#11 by Kulharee on September 27, 2005 1:01pm PT


I am so poor, I am considering pitching a tent in a friend’s backyard?


If you were in the US, you`d probably run afoul of some zoning law...so you`re poor and you can`t pitch your tent....

Re: # 12
your assessment is wrong here, to assume that prices will not fall.
Majority of the single family home sales during last 2 years were speculative kind, either ``fix-er-upper or second homes or interest only or ARM loans``
all of the above classify it as speculation.

I can see a big downward trend coming leading to Democrat president by 2008.
Just like what happened when clinton became president.

Comparing the hot housing market to the dot com bubble is comparing apples to oranges. Like the saying goes, you always need a house to live in, unlike stocks.

You always come out +ive in real estate if you keep it for > 7 years. (In california at least)

During the 2001-2003 meltdown in the bayarea when literally several hundred thousand jobs were lost, the housing prices didn`t ``crash`` or in most cases even ``dip``, why? because people took cash advances on their credit cards to pay their monthly mortgages while they kept looking for jobs!

I bought some land near Islamabad in March and the value is already more than doubled. Who gives an F if it is a bubble. I`ll sell it during my next trip and to hell with all you nay sayers!

Dullay pai, you should`ve listened to your wife... the first condo that I bought in `97 (2+1.5) in Cupertino school distt. for 218K is worth 600K now. Do you think I`ll ever loose money on that?

It is a well researched article, however, I do not think that the reason for high prices for real estate in Pakistan is much of an enigma. There is a host of factors that have come into play:

1. The first reason is the returning of expatriate Muslims from North America and Europe to Pakistan in order to save themselves from persecution in the wake of 9/11. They have brought lots of money with them ( from Pak point of view); for example a guy who owned a US$ 100K house in North America, when brought that money with him instantly turned into Rs. 6 million. The first thing that these displaced people needed was a house for their families.

2. Almost whole of the top military brass in Pakistan is currently on CIA`s payroll and they get paid in US$s for the services rendered; Real estate business is a pretty straight forward rackette to launder that kind of money.

3. Every warlord and drug dealer and their private armies in Afghanistan is on CIA`s payroll. They would rather invest their payouts in Pakistan, where it is safe and grows, than in the hellhole of their own country. It is a practice that started in Zia era and continues to this day. One of the main reasons the real estate prices in Islamabad have gone bonkers.

4. The CIA in turn funds itself through promoting drug and weapons trade to Europe and Far East thru Paksitan. It is also a practice that started during Zia era and continues to this day. That is the reason that a parallel undocumented economy has emerged from Torkham and Landi Kotal straight to Karachi.

5. The payout by drugs, weapons, and gasoline smugglers only and only at Iran-Pakistan border is Rs. 10 million per day to Pakistani officials that go upto the Director General of Rangers. This would give you a hint into the volume of payout at Afghan-Pak border.

The point is very simple, thanks to military dictatorship, too many people now have vested interests in this parallel economy. Military is the biggest stakeholder in this whole sordid business. They would never relent the powers to the civilian representatives of the people who would be accountable to the very people. Military would never let the independent legislation to take place in this country. Thanks to them, now no one will be able to have a roof over their head either. I don`t think there ever will be a bursting of a dot.com like bubble ever in Pakistan due to market reasons.

good article. reminds me of ``random walk down the wall street``