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Rupee vs Dollar Plunge – Effects on Real Estate Market

Rupee vs Dollar Plunge – Effects on Real Estate Market

Dollar, being the most widely used foreign currency for global trade impacts the prices within Pakistan. There is no denying the fact that ever since the start of 2018 the rupee has been sliding compared to US Dollar and these days it is at an all time low. This becomes a core cause for inflation in the country as commodities are usually priced up as petrol prices are usually raised. Although it does not directly affect the local sale purchase of property but when it is about the investments by overseas Pakistanis, securing their ROI can be risky as they measure in the foreign currency they have invested.

When inflation is already high, further slide of the Rupee makes people jump out of their skins. As it becomes difficult to makes both ends meet for the common man, buying a new property seems totally out of the context. Thus it indirectly does affect the real estate market but in a small way as investors are usually well off people who are investing their savings rather than daily earnings. The devaluation of currency is mainly because of the political situation in the country as when foreign reserves are down the impact is lethal. The devaluation creates a negative image in the eyes of foreign investors who are equally important to keep the market running smoothly.

Whenever a person invests in a property there are two main factors behind his motive:

  1. The profit earned after the waiting period (when selling)
  2. Rent

Now if the investor is a foreign settled Pakistani he will surely measure both in comparison to the US Dollar. For instance if he is getting $1000 a month in the form of rent, although the rent has not decreased, but with the devaluation of rupee his income will reduce to an example of $900. It is common sense that the investor will measure it as a $100 loss each month thus instead of the property being valuable to him would seem like a loss.

This is one huge reason why we need to have a stable dollar rate with comparison to the rupee. It is a reason we have recently seen in the change of attitude of the foreign buyer towards Pakistani property. Since land cannot be taken abroad, they are seemingly more interested in purchasing mobile goods that they can carry with them once they leave the country for instance gold. The government and State Bank of Pakistan must keep a watchful eye on the flight of capital from within. A strong check and balance should be kept on money traders and see why the foreign reserves plummet all of a sudden.

This is not the first time we have seen the rupee slide against dollar. But the constant decline can be very bad for every industry and the layman will have to suffer the worst. We hope with the new reforms coming forth by the new government will attract investment rather than the opposite. We hope we will see a boom in the real estate market with the entry of foreign buyers in the real estate market.

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UPN

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