The severe energy crisis in Pakistan puts its fragile economy and unstable national security environment in a difficult situation. Anyone who owns properties will be impacted by the growing cost of energy. However, they might also observe an increase in demand for buildings that could address this problem.
Real estate is a property investment project consisting of land, buildings, and natural resources such as water. Real estate consists of residential, industrial, commercial, raw land, and special use. The increase in prices will have an effect on 99% of the population because their primary expenditures, such as food and fuel, have all increased significantly. The average price of real estate has increased, which is good news for investors.
Money is designed to move. Having money in your account that isn’t functioning for you is of no use. All that will happen is that its value will be reduced by inflation. Some of the major impacts of the energy crisis in real estate are described below.
Real estate society’s value drops
If there is an energy crisis in some real estate society, then this means the worth of that society drops. This also means investors would think twice before investing in that society or may not invest, to begin with.
Operating expenses have increased for asset managers, building owners, and tenants. Existing issues and problems are accentuated during a crisis, as they always are. With the energy bills to show it, an inefficient building is now a very expensive building. Energy-intensive buildings with hefty service fees will become unappealing and difficult to rent as corporate tenants strive to lower their own overhead costs. There is a chance that leases won’t be renewed, and yields will drop if rent isn’t collected.
Increased utility bills
When there is a shortage of natural resources such as electricity, real estate owners are bound to increase electricity bills per unit.
Drop in GDP growth
Apart from providing luxurious facilities to people, real estate also improves economic growth as it adds a lot to the GDP. With that said, the shortage of natural resources in a real estate society reduces the revenue of that society. A reduction in the revenue of real estate means there will be some reduction in GDP growth as well.
An energy crisis is a very serious matter as it can cause a lot of damage in many ways. An energy crisis in real estate society may end up damaging it pretty badly. Increment in bills/rents due to the energy crisis in real estate society can easily pull people away from it.
That said, if a particular real estate housing society offers too many modern facilities & amenities, there is a good chance an energy crisis won’t make people turn away from that particular society. After all, people may comprise on shortage of a particular natural resource with outstanding facilities & amenities.