Home Ownership And Investment In Al Jalil Garden

Few investment sectors in Pakistan are unaffected by its political and economic unrest, but real estate is one of them. Because it is traditionally seen as a safe investment hub with promising returns, most Pakistanis choose to invest here.

 

Historically, whenever the economy prospers, the sector functions as a supporter. Recent government-imposed restrictions and tariffs appear to have slowed the sector's growth to some level, although this hasn't shaken the confidence of general customers. It is why most Pakistanis prefer to invest their hard-earned money in purchasing land or building houses.

 

According to a study, more than 75% of Pakistanis live in their own homes, whereas only 25% live in leased dwellings. Based on these findings, we may conclude that Pakistan's homeownership rate is higher than that of several developed countries, where most of the population owns no property. Because you may not be aware of the truth, the findings have undoubtedly put a great smile on your face.

While most Pakistanis own their homes, fractional research reveals that more than 60% of the country's population lives in rural areas and fewer than 40% in cities. Villagers have been shown to own their dwellings, regardless of how little space they have. More than 60% of Pakistanis who own a home are from villages, which account for 75% of the population.

There are financial and non-financial advantages to purchasing your own house. Today's headlines appear to be largely concerned with the financial elements of homeownership, notably affordability. Many articles claim that purchasing a property in today's market is unaffordable. However, this is not the case.

The average monthly mortgage payment for today's buyers is roughly 20% of their income. The 20 percent of income that buyers are currently paying is comfortably below the advised 28 percent range.

 

Why Is There So Much Discussion About Affordability Issues?

 

"It's not that houses are unaffordable; it's just that they're more so."

Because property prices are rising, homes are less affordable than in the fifteen years since the housing meltdown. These claims in headlines aren't false; they just don't tell the complete story. To get the complete picture, you need to compare today's data to past data.

A more detailed examination of affordability from 1975 to 2005 finds that homes today are more affordable than at any time during that period.

Despite this, affordability concerns are causing some buyers to sit on the fence. They are uneasy knowing that someone else received a better deal a year ago.

Homes Are Less Affordable When Equity Is Included In?

Odeta Kushi, Deputy Chief Economist of First American, presents a distinct perspective on the financial aspects of housing affordability in a recent piece. According to Kushi, we should at least evaluate the impact of equity accumulation on the affordability equation: 

"For people looking to acquire a home, significant increases in house prices might be scary and make the transaction more expensive. Once a home is purchased, however, appreciation contributes to the home's equity and is thus viewed as a benefit rather than an expense. Every one of the top 50 markets was cheaper to buy when we included the appreciation benefit in our rent versus own analysis."

Investment Opportunities In Al Jalil Garden

Let's take a look at a hypothetical situation. Mr. Ali looks at the rent vs. buys possession in                  Al Jalil Garden Housing Scheme Mr. Ali chose Aljalil Garden because its home prices are close to the national median for the top 50 markets.

Mr. Ali starts by figuring out the monthly mortgage payment on a median-priced home with a 20% down payment (al jalil garden payment plan) and a 3% interest rate (see chart below):

 

Price	95% of Mortgage	P&I	Approximate Monthly cost
2,800,000- 3,800,000	Upto 5 million	5 %	5000

 

Mr. Ali then subtracts the home's appreciation over the past twelve months from the monthly cost. In the second quarter of 2021, the average house price in Al Jalil Garden grew 10.5 percent over the previous year. If the current rate is maintained, this corresponds to an equity benefit of around 35,000 per month (see figure below)

Monthly Cost Evaluation And Equity

Approx Monthly cost	Equity %	Value in change monthly
35,000	10%	25,000-45,000

 

We can see that the monthly equity gain exceeded the monthly mortgage payment, resulting in a negative cost of ownership. Each month, the buyer might increase their net worth.

When you factor in the cost of equity build-up, renting is 45,000 more expensive than owning, when the equity component is taken into account, owning in Al Jalil Garden Lahore.

Conclusion

If you're on the fence about whether to buy or rent right now, talk to Al Jalil Garden Customer Services in your area to see if the recent growth in equity in your neighborhood should influence your decision.