Illegal housing societies struggle as Punjab cracks down on them
Housing scheme developers and the owners of residential construction companies are currently witnessing their efforts going down the drain as Punjab cracks down on illegal housing societies (IHS). While Punjab’s crusade against the 600 illegal societies serves to displeasure them, it comes as great news for those that have been operating legally.
This development comes as in the coming months, the real estate market could see large transfers of investments from IHS to genuine ones. This investment transfer to competitors could cause a spike in the land prices of legal societies.
Experts believe there will be a twofold effect on land prices, which will effectively drive up the value of land in approved societies. Initially, the fall in the supply of legal land that can be purchased will cause land prices to rise. Furthermore, speculators who will identify the fall in supply will purchase land to reap the rewards of the rising values – thus driving up land prices again.
Legal societies and investors with available capital who are forward-looking will be able to benefit immensely from the woes of those involved in unapproved and illegal societies.
On the other hand, any party associated with the IHS will now have to pay a hefty price. This metaphor is quite literal for some as they will have to pay fines, financial penalties, and fees to get societies approved.
Dawn News has reported that LDA teams have been able to retrieve 600 kanals from illegal occupants in various well-known schemes, such as Johar town and Sabzazar colony in Lahore.
The stakeholders that are expected to be hit the hardest are owners of residential construction businesses. This is because the crackdown on unapproved societies will halt many construction projects.
These project delays are expected to cause significant issues for builders as they have to pay their workers on a daily basis. When projects halt, many builders may find it difficult to afford the wages of their employees as their business will not have a healthy cash flow.
The plight of the losers of this crackdown does not end there, however. The fact of the matter is that this crackdown will cause major issues for the 42 ancillary industries that provide raw materials to construction businesses.
For example, as per Profit by Pakistan, the cement sector is projected to see a growth rate of 2.4 per cent in FY 2025. However, this figure may witness some downward revisions after construction projects get delayed or even halted in unapproved societies.
In the coming months, the real estate sector could see some movement again in terms of prices. One thing is certain, though: Speculators will keep their eyes peeled for any such movements.