Revisiting Urban Immovable Property Valuation: An Appraisal of Spatial Heterogeneities in Punjab Using Big Data (Article)

This study employed big data and spatial analysis to assess property values in two cities, Lahore and Faisalabad. Traditional housing price models overlook spatial nuances, focusing solely on structural attributes. To address this, we constructed valuation models using ordinary least square regression and Fast Geographic Weighted Regression (FastGWR), implemented through Python and MPI, based on spatial variables. The models explained up to 75 percent of variance in Faisalabad and around 85 percent in Lahore. Factors like floor area, proximity of health facilities, recreational sites, and marketplaces add a premium to prices, while the nearness of educational institutions, worship places, and solid waste transfer stations or dumping sites lessen the property values in both cities. However, the proximity of industrial units and graveyards affects property values negatively in Lahore but positively in Faisalabad. This study highlights the critical significance of spatial factors in urban immovable property appraisal. As a result, it is recommended to integrate these factors into the process of policy formulation and urban planning.

1. INTRODUCTION

Pakistan’s real estate market emerges as a potential economic powerhouse, with a substantial portion of the nation’s wealth concentrated within its real estate assets, estimated at 60-70 percent. While the sector contributes around 2 percent to the GDP, the combined impact of housing and construction reaches nearly 9 percent. The value of Pakistan’s real estate sector, evaluated at approximately $700 billion by the Federal Board of Revenue, signifies its economic significance. Impressively, returns on investment can soar beyond 100 percent (Ouattara et al., 2018). However, this promising market is juxtaposed against a backdrop of challenges and disparities. Pakistan’s population, surpassing 225 million, expands annually at a 2.4 percent rate, characterised by an average household size of 6.5 (Pakistan Bureau of Statistics, 2019). With a yearly housing requirement of 700,000 units, merely half of this demand is met, leading to an alarming gap of roughly 10 million units (Rizvi, 2018). This housing shortage necessitates innovative strategies, particularly in the realm of low-cost housing schemes. The intricacies of property valuation further complicate the real estate landscape. Government land acquisitions relying on DC valuation tables often incite public protests due to perceived undervaluation (Sabir et al., 2017). The importance of precise valuation for equitable compensation is underscored by research (Malaitham et al., 2020). Notably, property valuation is not just pivotal for buyers and sellers; it resonates with stakeholders such as investors, banks, agents, and insurers. The geographical location holds substantial influence over a property’s price, further emphasising the necessity for accurate valuation (Mankad, 2021).

In dynamically growing cities, the accurate prediction of urban land use evolution plays a pivotal role in fostering sustainable urban planning (Liang et al., 2018) such as Lahore and Faisalabad in Pakistan. Notably, vast untapped potential resides within public properties, including Government Officers Residences (GORs) and railway lands, representing latent avenues for wealth creation. Leveraging these assets effectively can substantially contribute to economic prosperity. The implications of this study extend to policymakers, offering insights to navigate the intricate domains of housing and urban development. A robust housing market stands as a linchpin of a resilient economy; however, Pakistan’s housing sector faces an intricate array of challenges. Urbanisation and migration galvanise demand within urban centers, an issue compounded by insufficient supply catalysed by diverse factors. Shortcomings in land usage, planning, and property rights impede progress, while inadequate revenue collection from property taxes curtails infrastructure financing. The labyrinthine regulations further stall land development, exacerbating housing availability discrepancies, particularly pronounced in megacities like Karachi and Lahore. Notably, housing construction trails behind the meteoric pace of population expansion. Skyrocketing market conditions render housing unattainable for many, channeling them towards informal settlements (Dowall & Ellis, 2009; Haque, 2015; Wani et al., 2020; Yuen & Choi, 2012). The challenges are particularly pronounced within Punjab’s housing markets, accentuated in cities like Lahore and Faisalabad, grappling with deficits in affordable housing (Malik et al., 2020; Wajahat, 2012). A glaring obstacle lies in the hands of speculative investors who control 75 percent of residential plots, perpetuating this complex issue (Zaman & Baloch, 2011). This practice thrives on secure real estate investments and tax loopholes, compounding the predicament. Although plot prices surge significantly (Gul et al., 2018), official valuations lag behind, generating volatility in Pakistan’s property prices. The repercussions of such fluctuations extend to the public, shouldering the burden of investor gains. Despite intermittent housing policies, the issue remains inadequately addressed, emphasising the urgency of public sector interventions to stabilise spiraling prices (Ahmed et al., 2021).