Pakistan is a country with limitless growth opportunity in almost all sectors, construction being one of them. The government is providing subsidy to sectors that have high positive cyclical effects. However, malpractices in the real estate sector prevent it from flourishing beyond a point that was reached decades ago. In other words, things are stagnant. For quite some time, the image of the industry is tarnished by fraudulent realtors and malpractices. People engaged in the real estate sector perceive investors as cash cows. Instead of executing a good deal that will attract potential investors, the agents wish to make maximum commission through a single deal. There is no transparency, i.e. incomplete disclosure of information on financial transactions. Pakistan ranked 75th on the Global Real Estate Transparency Index, which was an upward jump of about 15 places. However, there is still a vast area that requires improvement and development.
Pakistan gets a sizable portion of its Gross Domestic Product (GDP) and economic activity from this sector, hence, revamping it will do wonders. Realizing this, the Government of Pakistan established Real Estate Regulation and Development Bill last year. Under this, the ‘Real Estate Regulation Authority’ (RERA) was formed. As a result of this, Pakistan improved on the Global Real Estate Transparency Index as stated earlier.
Last month, the National Assembly (NA) approved the Islamabad Real Estate Bill 2020. The objective of this bill was to regulate real estate under RERA. As a starting point, the authority is to form appellate tribunal courts that will solve ongoing disputes in the concerned sector. Since large groups of people and families are involved in Pakistan, real estate and property disputes have tendencies to stretch over years and at times over decades. Increasing transparency will boost confidence of the investor who is hesitant to risk his/her funds.
Real Estate Regulatory Authority (RERA)
Under RERA, all real estate dealing will be transparent. It will be mandatory for agents operating in the field to be registered with concerned authorities. This registration may commensurate to a quality attestation/affiliation with an official body so the investor can feel safe with their money as agents will have to pass their deals through authorities in selling houses, plots or buildings. Stakeholders here are not only confined to individual customers but also encompasses Small and Medium Enterprise (SMEs) or corporate level customer/party. The developers are liable to show the details of their past projects before taking up new projects for companies. Even their advertisements will also be filtered through the authority’s lens. Not only this, but RERA will also have the authority to revoke licenses should an agent or a body fail to comply with their conditions.
Conditions to obtain licence from RERA
- A minimum threshold.
- In order to obtain licenses, conditions will have to be met and standards will have to be lifted.
- Once obtained, any slack in performance or signs of subpar standards will be monitored by RERA.
Pakistanis over the years have had a reputation for investing abroad. Not only will this bring back investment to Pakistan, but it will also, in due course, get overseas Pakistanis thinking about investing back home. Considering the huge amount of foreign exchange our economy earns through overseas Pakistanis sending money back home, one can only imagine the flow of Foreign Direct Investment (FDI) when it comes to investing in real estate in Pakistan. RERA will act as a consultant/advisor for the government in matters of real estate.
Another body will be established, comprising of representatives from the Ministry of Finance, Interior Ministry, secretary-level officials from the Ministry of Law and Justice and focal people from the Naya Pakistan Housing Program (NPHP) and the National Highway Authority (NHA), to look after all affairs through a different and diverse perspective with the team being more versatile in nature and style. The government is subsidizing the construction industry as well which is a very basic component of the real estate industry. The government tapped into the potential of the construction industry, which, in turn, drives more than 50+ allied industries, including cement, iron, steel, timber and wood, marbles, tiles and stones, electrical and sanitary works, glass, paints and varnishes, electrical lightning, power and gas, horticulture, interior decoration, transport, light-heavy construction machinery, plastics, fibres, furniture, electrical appliances, etc. to kickstart developmental activities and the economy.