''Committee'' is an old-school but effective way of saving money, and is ubiquitous in our society. The access to formal financial services (savings, credit, investment, insurance, etc.) is available to only a small part of the population (roughly 13% adults according to World Bank). Therefore, in the absence of better alternatives, many Pakistanis resort to informal means of saving, like committees.
For an average Pakistani, buying a plot or a home means years of saving money and disciplined spending, which unfortunately isn't everyone's forte. Most of us love to eat out and spend impulsively. This is where these committees come in handy. You can use them to get into the real estate game.
Make a planThe best strategy would be to save enough money for the down payment of a plot. After that, most developers offer a monthly payment plan. Let's say you want to buy a plot in Lahore. Opt for a reliable housing society on the periphery of the city that offers plots on instalments.
Prices now
Right now a 5-marla plot costs around PKR 1,800,000. If you are looking to plan for the next year, you need to take into account the fact that prices will rise.
Prices then
According to the Zameen.com Index, in the last year, prices have gone up only by 1.46%, but that is because there has been a slowdown in the market. In last two years, the increase in prices has been 28.49%, and it would be better if you take the average yearly increase – 14.25%.
So at the end of next year, the price of a 5-marla plot in an affordable society is going to be around PKR 2,056,436. The 25% down payment for this plot will be PKR 514,109.
And that means you need to save roughly PKR 42,842 a month, for a year.
Monthly instalments
A typical developer usually offers a 3-year payment plan, and the monthly instalments of your plot would be around PKR 42,842.
To sum things up, you need to save around PKR 40,000 a month for four years to be able to own a plot in a decent housing society. This requires discipline, which is something committees can help you with.
Types of committeesThe most popular is the ballot committee, in which members (usually friends or family members) contribute a fixed amount every month to the pool. Then, a draw takes place every month and all monthly savings are received by a lucky member. This goes on for the duration of the committee – usually one or two years, and by the time committee ends, all members get back the money they saved, some earlier and others a little later.
Lucky committee is a variant in which once a member's name is withdrawn, they cease to contribute to the monthly pool. In this arrangement you can win or lose money.
In the third version, the name of the monthly winner is not decided by a draw, but by a bidding process. So let's say 10 members form a committee of PKR 10,000. At the end of the month, the members would bid for the monthly pool of PKR 100,000. If lowest bid is PKR 91,000 it means that that member is letting go of PKR 9,000 for the advantage of getting that capital now. This money can be divided among the nine remaining members as profit.
So, take your pick from the types of committees on offer and start saving money now for your future. If you have any personal experience with committees or strategies to share, make yourself heard in the comments section below.
Source: Committees to help you save money for a plot
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