The Importance Of Insurance:Benefits Of Insurance

Most people in Pakistan are averse to insuring their property due to the premium involved.
Despite their aversion there are 59 insurance companies operating only in Pakistan, of which 51 provide general insurance- insuring other then life- while the other sight deal specifically with life insurance.
In developed countries all properties and assets are insured for their actual value against any possible damages or loss due to unforeseen circumstances. In Pakistan, most property transactions are undervalued to save on tax, which when it comes to buying insurance means that the property cannot be insured for its actual market value.
For property insurance cover to be beneficial it is importance that the following points are kept in mind.

1) It is vital that the insurance policy cover the actual value of property rather then an understated value. For this to happen it is essential that all property documents contain the actual value of the property.
2) Understand clearly what the sum insured (the amount of money insured) means. Usually this sum covers the property's value at the time of insuring or the cost of replacing it if it is destroyed.
3) Make sure that the premium, which is based on the sum insured and the risk of damage occurring to the property, is paid on time (monthly/quarterly/yearly) so that the policy does not lapse. Most insurance companies will not entertain any claim if premium payments are not up to date.
The events of December 28, 2009 in Karachi are a stark reminder of what can happen and how easy it is to lose one's source of income as the traders and shopkeepers of Bolton Market, Paper Market, Kutchi Gali( Medicine Market) and Light House sadly did. According to the claims made by various traders associations, about 8,000 to 10,000 shop and warehouses were set ablaze and 30,000 to 32,000 people who lost their source of income. Goods worth billions of rupees ranging from plastic products to grocery products, toys, arms and ammunition, electric items, cloth and medicines were destroyed.
Unfortunately none of the shopkeepers in these markets were insured. This gives food for thought that majority of the people here in Pakistan, who shy away from the idea of insurance cover.

Lack Of Affordabale housing Units

As many as 700,000 people are added to the population every year, but only 300,000 housing units are constructed leaving a shortfall of 400,000.
About 40% of this population belongs to the middle and lower-middle class segments who dispose of monthly incomes ranging between 6000 and 12,000 rupees; in other words they can only afford to buy housing units costing between 200,000 and 500,000 rupees.
According to the world bank, loans to buy property are difficult to obtain and are usually given to the upper income groups, leaving other segments with no mean of buying property. As a result most are forced to acquire land through illegal means and hence the mushrooming of Katchi Abdai's in Pakistan's major cities. Karachi alone has 600 to 800 illegal settlements sheltering about 7.6 million people our of the city's total population of 18 million people.
Sindh has 1,300 Katchi Abadi's covering 24,300acres of government-owned land and 1,700 acres of private land.
A possible solution lies in lowering the mark up rates offered by banks on long term loans thereby making the monthly repayment installments for mortgaged finance equivalent to the monthly rents of houses and apartments paid by tenants. In this way millions of people living in rented premises could at least have the opportunity to buy their own house or apartment, without having to pay exorbitant sums of money at one go.

Tremendous Growth In E-Banking Witnessed

E-banking has grown tremendously in recent years and considerable improvement in the e-banking infrastructure and activities during last fiscal years 2010-2011 is a continuation of recent trends.
According to the State Bank Of Pakistan(SBP) the quarterly number of electronic transactions reached 53.4million by fourth quarter of last fiscal year , almost doubling in the last three years.
This clearly reflects the increasing use of e-banking services in the payment system infrastructure. This is an encouraging development as e-banking facilities provide a viable solution for expanding the outreach of financial services to remote areas. The composition of electronic transactions indicated that ATM based transactions account for over 50.0 percent of total electronic transactions, and that the share of these transactions is gradually increasing over time.
This rise in attributable to both the increasing number of ATM cardholders and the number of financial services offered through ATM's. Real time Online Banking Transactions are the second largest component of electronic transactions, with a share of 30.9 percent in FY10.
SBP revealed that transactions at POS terminals/machines account for nearly 8.0 percent of total electronic transactions, while transactions through internet, mobile banking and call centers, constitute only 2.2 percent of financial transactions.

I-9 Industrial Area: Steel Mills In Pakistan

Sector I-9 is one of the few sectors in Islamabad that is not purely residential. It has an industrial aspect in the shape of sub-sector I-9/3, most of the Steel Mills In Pakistan are situated there, the sector is also knows as Industrial Area I-9.
Boundaries are: Islamabad Dry port, Sector H-9(north), sector I-9/4 and I-9/1 residential areas, I-9 Markaz(south) sector I-8, 9th Avenue(east) and Sector I-10(west).
Industrial Area I-9 is known for its 'go downs'; some of the major national and multinational companies have their storage facilities located there. These companies include those dealing in electronics, heavy machinery, oil, and pharmaceuticals. Other bushiness come in the form of rice mills and steel mills.
The proximity of residential areas means that the Capital Development Authority imposes strict guidelines on industry owners with respect to environment protection. The roads and streets are especially wide so as to accommodate heavy traffic. The area is easily accessible through the major link roads, such as the Kashmir Highway, Islamabad Expressway and the IJP road. These roads also provide easy access to the Motorway.
Storage space can be bought and rented. Although sizes range from 1,111 to 5,555 square yards the most commonly available sizes are 2,700 and 3,300 square yards.

Prices:

• 2,700 square yards: 45 to 65 million rupees.
• 3,300 square yards: 55 to 75 million rupees.

Rentals are calculated on the basis of total covered area. The rental value ranges between 22 to 25 rupees per square foot.

The Property Ombudsman: About Ombudsman

The office of the Ombudsman came into existence by the President's Order No. 1 in 1983 and began functioning in August that year. The headquarters are located in Islamabad and there are regional offices in Dera Ismail Khan, Faisalabad, Karachi, Lahore, Multan, Peshawar, Quetta and Sukkur.

Working at both Federal and Provincial level, the function of the Ombudsman is to provide relief to citizens who have complaints against government functionaries and departments involved in malpractices. Currently, there is no "property Ombudsman" in Pakistan. to add transparency to the real estate sector, there is an urgent need that the four professional governments appoint a property ombudsman in order to provide low cost and speedy justice to people with grievances.
The Principle Duties Of A Property Ombudsman Will Be To:
1) Investigate complaints against buyers/sellers, landlords/tenants, estate agents/builders and developers, determine the facts and announce judgment after hearing the grievances of the parties in dispute.
2) Issue instructions for the payment of compensation to the complaints.
3) Help improve the functioning of the real estate sector by highlighting shortcoming related to the way documentation is handled.
4) Suggest measures to the government aimed at enhancing transparency in the way real estate transactions are conducted, as well as new laws aimed at eliminating illegal practices prevalent in the sector.

The New Real Estate Investment Trust Rules

Real Estate Investment trust (REIT) is a form of security listed on the stock exchange. They allow people to invest in major real estate projects. It was in 2008 that the Securities and Exchange Commission of Pakistan (SECP)issues regulations that enabled the formation of Real Estate Investment Trusts. in 2010, the SECP has issued modifications to those regulations to conform to the current market situation.
The new modifications include the following:
1) The minimum funding that has to be generated through a Real Estate Investment Trust has been reduced from five to two billion rupees.
2) the capital investment requirement from a Real Estate Investment Trust management Company (RMC) has been reduced from 500 to 200 million rupees.
3) A REIT may now develop and rent out a property ; earlier only development for sale purposes was permitted.
4) The RMC may now charge fees on a quarterly rather then an annual basis. The fees are based on the one percent of profit  the REIT earns from the sale of a project, or two percent from the REIT rental yield.
5) A single REIT may manage a single property by developing it for sale or renting it, or a mix of both.
These modifications have been made in order to offer flexibility and encourage small investors to form RMC's and launch Real Estate Investment Trusts, thereby making real estate investment a viable option. The first REIT is anticipated to become operational in 2011.

The Rise And Fall Of Dubai Property Market: Abu Dhabi Property Market

Prior to 199 the right to purchase property in Dubai was restricted to the citizens of Arab states that made up the Gulf Cooperation Council (GCC). However, in 1999 when new residential and commercial projects was launched, the Dubai Government decided to open selected projects to foreign investment.
The policy makers were of the view that this measure would open doors to international property investors from France, Spain, the UK and US. They were right; and people from all over the world, including Pakistan, invested in the Dubai Property Market.
The peak period started in 2002 and saw Pakistanis invest more then US$10bn. According to the data available, 3290 property unites were booked by UAE nationals, 3243 by British nationals, 2510 by Pakistani nationals and 2450 by Indian nationals.
The third quarter of 2008 saw the Dubai market slump to unprecedented levels. This was due to a number of reasons including surplus supply, the hike in property prices, negative population growth, lack of mortgage facilities, defaulting buyers and the cancellation of many building projects by builders. By the end of 2008, foreign investors had disappeared from the Dubai market due to the global economic crunch.
Ever since, the glut in residential and commercial property has compelled owners to slash prices by more then 50%. Yet this too has failed to lure investors back, as they are anticipating a further decline in Dubai property prices in 2011.
TO make matters worse, the Dubai Government recently announced the imposition of a five percent tax on residential units and a 10% property tax on commercial units. This is in addition to the one percent transfer fee based on the selling price that is payable by the seller and purchaser of the Dubai property. Such taxation measures are bound to reduce the number of transactions taking place.
Stay in touch for the second part of the feature.