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Impact of Flooding on the Real Estate Sector of Pakistan

The Growth Ace
 Impact of Flooding on the Real Estate Sector of Pakistan

Floods are caused by unusually high water levels in rivers, lakes, or along the coasts, which exceed their natural or man-made boundaries. Floods are random and natural occurrences brought on by heavy rain, storm surges, typhoons, broken dams, glacial lake outbursts, or tsunamis. Floods are often associated with the rapid economic and demographic growth in developing nations, which has frequently led to the invasion of waterways and the deterioration of catchments.

Inadequate legal and legislative frameworks, weak governance, and poorly planned river basin development all contribute to the inappropriate exploitation of resources along rivers, lakes, and seacoasts by people and governments, which frequently leads to catastrophic devastation during floods. 

In terms of volume and area flooded, severe monsoon rains in southern Pakistan caused floods on an unparalleled scale. Despite predictions of below-average rainfall, torrential rains started in mid-August and soon covered all 23 districts of Sindh province1 as well as nearby regions of northern Balochistan province. These heavy downpours destroyed crops, infrastructure, and habitations, which impacted the country's economy. The period from July 1 to September 30, 2011, saw the most rainfall of the entire year. Mithi, Sindh, recorded the highest rainfall. Due to the sandy terrain, there was little runoff water and a high rate of soil penetration.

According to Secretary-General Antonio Guterres, he has “never seen climate carnage” on such a scale, blaming wealthier countries for contributing to the devastation.

Indicators of the socioeconomic and educational status of the flood-affected areas continuously lagged behind those of the unaffected areas. The destruction of their infrastructure and sources of income will cause them to fall further behind. The majority of those most badly impacted were small farmers and unskilled workers. They are among Pakistan's most vulnerable groups and nearly all of them are living at or below the poverty line.

Effect On Real Estate Sector

The infrastructure of the roads was severely damaged. The hilly terrain sustained the worst damage, and certain areas became completely inaccessible as a result of numerous bridges collapsing there. For instance, all connecting bridges across the Swat River across a 140 km stretch (between Chakdara and Kalam) were demolished. The flood severely damaged phone lines and cut off electricity to numerous major towns in Swat, Lower and Upper Dir, as well as Shangla.

Damage and Needs Summary by Sector Housing

In Sindh and Balochistan, the floods damaged 998,376 dwelling units completely or in part. A total of 484,093 homes have sustained partial damage, while 514,283 homes have likely been completely destroyed. With 99 percent of the entire housing stock impacted, Sindh province has sustained the vast majority of housing stock damage. 

In Sindh, out of the 992,679 affected homes, 512,462 [493,606 Kacha homes and 18,856 pucca homes] have been entirely demolished, while the remaining 480,217 [403,790 Kacha homes and 76,427 pucca homes] have been partially destroyed. There have been 5,697 Kacha dwellings estimated to have been damaged in Balochistan, 1,827 of which have been completely destroyed.

The remaining 3,876 homes have been damaged to some extent. Pucca homes have generally fared better during floods, but they are nonetheless susceptible to roof collapse, weakened foundations, and erosion at the corners and base of walls. Additionally, walls that are submerged have experienced hydraulic pressure from standing water, which frequently causes walls to flip over or tilt laterally. 

There have been instances where walls have collapsed and cracked as a result of the ground subsiding beneath soggy foundations. The damage has frequently been severe and irreversible for kacha structures.

The cost of fully demolished and partially damaged homes is estimated to be Rs. 85,465 million (US$ 982.4 million). The anticipated cost of reconstruction (for both entirely destroyed and partially damaged homes) is Rs. 91,510 million (US$ 1051.8 million).

Economic, policy, and planning scholars have long been interested in the link between perceived hazard risk and real estate values in Pakistan.

Although it might seem reasonable for prices to decline after a natural disaster, like a flood, such price reductions reveal a lack of sufficient risk knowledge among the real estate-buying public before the event. Natural catastrophes should, in theory, have no impact on real estate values where potential homebuyers have perfect knowledge about hazard risk and act rationally because such dangers should have already been priced into market pricing.

Recent flooding has caused serious issues for the real estate industry. The government of Pakistan is trying its best to overcome this issue as soon as possible.

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