- Navigating foreign investment in real estate sector for sustainable growth
- A streamlined and equitable taxation system is essential
- The sector will regain its momentum in a coming year
Interview with Mr. Rehan Khan — real estate professional
PAGE: Tell me something about yourself, please:
Rehan Khan: I am a real estate consultant. My company, Shaikhani Associates. is serving real estate sector. I am a member of Defence & Clifton Association of Real Estate Agents, Karachi Chamber of Commerce & Industry, FPCCI and Association of Builders & Developers. I have an academic background in mechanical engineering and graduated from a renowned university in Moscow. My journey into the real estate sector commenced in 1994, primarily focusing on prestigious real estate developments in Karachi, specifically in the areas of Defense Housing Authority (DHA) and Clifton. My experience in the real estate sector has provided me with insights into the dynamics of the property market, urban development, and community building. Over the years, I have actively contributed to DEFCLAREA’s mission of promoting responsible real estate practices and fostering positive change in the real estate landscape.
PAGE: Could you give your perspective on real estate business in Pakistan?
Rehan Khan: The real estate sector in Pakistan is a vast and dynamic field that encompasses a wide range of activities. From construction and property development to working as an investment consultant or realtor. Individuals in this industry play vital roles. Many start as team members and, over time, ascend to become team leaders, generating employment opportunities and fostering business growth.
In Pakistan, the real estate sector holds immense potential and significance. There is a consistently high demand for residential properties, both in urban areas and in more remote regions. This demand has driven the launch of numerous housing schemes, making the real estate sector one of the country’s core industries, particularly in terms of employment generation. The demand for various types of properties, including houses, flats, villas, and commercial buildings, remains strong. One notable factor in Pakistan’s real estate landscape is the significant contribution of overseas Pakistanis. They serve as a crucial source of foreign exchange for the country. In addition to sending remittances to their families in Pakistan, many overseas Pakistanis prefer to invest their savings in the local real estate market. This choice is influenced by the steady growth in property valuations and the personal requirements of owning property in Pakistan.
Unlike some countries that rely on tourism for real estate investment, Pakistan’s dynamics are relatively different. The country attracts substantial foreign investments in the real estate sector due to its growth potential and capacity for development. As living standards continue to rise, the demand for well-constructed houses and modern amenities is on the upswing.
Moreover, Pakistan’s population is steadily increasing, leading to a yearly requirement for millions of additional houses to accommodate newly married couples and other demographics. This growing population and evolving lifestyle preferences are driving the real estate sector’s continuous expansion and transformation. In conclusion, the real estate sector in Pakistan is a multifaceted industry with great potential, driven by high demand, the support of overseas Pakistanis, and the evolving needs of the growing population. This sector is not only essential for providing housing solutions but also for stimulating economic growth and employment opportunities within the country.
PAGE: What is your standpoint on the taxes on real estate?
Rehan Khan: Taxes play a pivotal role in funding essential government functions and services. However, the key lies in striking a balance between revenue generation and ensuring a simplified tax mechanism. Ideally, everyone wants to fulfill their tax obligations, but the complexity of the system can sometimes deter compliance. One notable aspect is the tax exemptions provided to overseas Pakistanis, who are a significant source of foreign exchange for the country. This policy recognises their contribution and encourages their continued support. However, it is essential to ensure that tax burdens are distributed fairly, so the entire weight of taxation is not solely borne by those who regularly file their tax returns, often referred to as “filers.”
There is an ongoing shift towards improving the tax system, with the digitalisation of the economy playing a crucial role in simplifying tax procedures. These digital advancements are expected to make it easier for individuals and businesses to comply with tax regulations and contribute their fair share. It’s worth noting that economic conditions can be cyclical, with periods of ups and downs. While the overall economic situation may currently present challenges, these fluctuations are part of the natural business cycle. We remain optimistic that with the right policies and efforts, we can achieve economic growth in the near future. The real estate sector, in particular, has the potential to make substantial contributions to the national exchequer. In essence, there is always room for improvement in any tax system, and the key lies in identifying and addressing areas that require refinement. A streamlined and equitable taxation system is essential for fostering economic growth and ensuring that all taxpayers can meet their obligations with ease.
Foreign investment in the real estate sector in Pakistan can have both positive and negative implications. Here’s a balanced perspective on the topic.
PAGE: What is your take on the foreign investment the real estate in Pakistan?
Rehan Khan: Foreign investment in Pakistan’s real estate sector can have a significant impact on the country’s economy. It can bring in much-needed capital, stimulate economic growth, create employment opportunities, and enhance the infrastructure and quality of real estate projects. In addition, foreign investors often bring international expertise, which can lead to advancements in construction techniques and urban planning. On the downside, an influx of foreign investment can sometimes drive up property prices, making it more challenging for local residents to afford homes. There is also the risk of speculative behavior in the real estate market, which can lead to property bubbles and volatile market conditions. It’s essential for the government to strike a balance by implementing policies that encourage foreign investment while safeguarding the interests of local citizens. Promoting transparency, enforcing regulations, and monitoring foreign investments are key steps in ensuring that foreign capital positively contributes to the real estate sector and the broader economy.
In conclusion, foreign investment in Pakistan’s real estate sector has the potential to bring significant benefits, but it must be carefully managed to avoid any negative consequences. Balancing the interests of both local and foreign investors is critical for sustainable growth in the real estate sector.
PAGE: How would you comment on the performance of real estate during the current year?
Rehan Khan: Commenting on the performance of the real estate sector during the current year, it’s evident that the sector’s performance has been below par. Several interrelated factors, including political, economic, and the introduction of new taxation policies, have collectively contributed to this subdued performance. The real estate sector is highly susceptible to the broader economic and political climate. The ongoing economic challenges, such as rising inflation, fiscal deficits, and a depreciating currency, have exerted downward pressure on property demand and investment. These economic challenges have led to a cautious approach among potential investors who are apprehensive about making significant real estate commitments in such an uncertain economic environment. In addition to economic concerns, the political landscape has played a significant role in the underperformance of the real estate sector. In the lead-up to the general election, political uncertainty has prevailed, leading investors to adopt a ‘wait-and-see’ approach. The inherent instability in the political climate can deter both domestic and foreign investors from engaging in substantial real estate transactions. Adding to the complexities, new taxation policies have been introduced in the current year, further impacting the real estate sector. These new tax regulations have modified the financial dynamics of real estate transactions and investments. They have generated uncertainty and altered the cost-benefit analysis for potential investors, affecting their willingness to engage in the market.
However, there is optimism that the situation may improve in the near future. It is anticipated that after the general election, the political landscape will become more stable. This political stability can instill confidence in investors and contribute to a return to normalcy in the real estate sector.
Moreover, if the economic challenges are addressed effectively and the new taxation policies are refined to encourage investment, the real estate sector may witness a resurgence. Political stability, an improving economic outlook, and well-considered taxation policies can collectively stimulate property demand and investment, eventually restoring the sector to a path of growth and prosperity.
In conclusion, the current year has been marked by a combination of economic, political, and taxation-related challenges that have adversely affected the real estate sector’s performance. However, with the upcoming general election, the potential for political stability, and the possibility of addressing economic and taxation concerns, there is hope that the sector will regain its momentum and return to a trajectory of growth.