5 Points To Consider When ‘Commercialising’ a Residential Property

5 Points To Consider When 'Commercialising’ a Residential Property

The demand for commercial property in Pakistan is increasing by an estimated 10% every year. Although new commercial developments (including office buildings and shopping centres) are being established to meet this demand, in some urban areas the availability of land is proving to be a challenge. This is leading to an increasing number of residential properties being converted into commercial ones.

Here are a few points to consider when ‘Commercialising’ a residential property:

  1. In cities such as Islamabad, Lahore and Karachi, the local development authorities (FDA, LDA and KDA respectively) have declared certain roads and streets to be ‘commercial districts’ where offices, shops and other commercial entities can be constructed. The width of these roads is usually at least 100 feet. Residential properties (such as houses and townhouses) along these roads and streets can be converted into commercial ones; a complete list of these roads can be obtained from the respective authority’s offices.
  2. Before a property can be converted, the owner has to inform the public of his/her intentions via an advertisement in the newspapers. If no objections are raised, then the owner can go to the relevant authority to begin the conversion process, which can take anywhere between 30 and 90 working days. Once the paperwork is complete, the owner can use the property for commercial purposes, or sell or rent it as a commercial property.
  3. A conversion fee has to be paid to the local authorities amounting to approximately Rs 4,000 to 16,000 per square yard.
  4. On average, the conversion of a residential property into commercial increases its COS (construction of saleable area) ratio from 1:1 to 1:8. The higher the COS ratio, the higher the square footage of the built-up property. This means that a commercial property can have eight times more constructed space than a residential one.
  5. Converting a residential property to a commercial one raises its value by anywhere between 200 and 400%, depending on its location and demand.

This article is written by Mr. Muhammad Shafi Jakvani, CEO – Citi Associates. You can get in touch with him at jakvani@gmail.com. This article was first published in the Real Estate Section of The DAWN National Weekend Advertiser.

Citi Associates – Real Estate Consultancy, Brokerage and Investment Services

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