Pakistan has a lot of potential for growth in every sector. The government is also taking steps to improve economic conditions to subsidize sectors, which surely has a positive recurring effect. However, the ancient practices and outdated laws are still major hurdles on the path of a flourishing real estate sector.
The industry is currently speckled by different malpractices and fraudulent realtors. The people associated with the real estate sector often perceive investors as meal-ticket. The realtors are more inclined towards earning a maximum possible profit in a deal than to finalizing a deal professionally so that it will attract other potential customers and benefit them in the longer run. Commissions are high, crossing ethical boundaries have become a norm, and transparency is rare.
As per the Global Real Estate Transparency Index, Pakistan stands at 75th rank. The country saw a jump of almost 15 places from where it was standing before. However, the room for development and improvement is still wide.
The real estate sector contributes a significant portion of the country’s Gross Domestic Product (GDP) annually through economic activities. However, basic reforms in this domain can turn the tables in favor of the country’s economic growth.
Federal Government of Pakistan acknowledging the fact that the real estate sector eagerly needs reformation has established a Real Estate Regulation and Development Bill last year. Under the umbrella of this bill, The regulatory body ‘Real Estate Regulation Authority’ (RERA) was formed.
This move helped the country remarkably to improve its Global Real Estate Transparency index.
This month, on 20th October, The National Assembly (NA) of Pakistan has approved the Islamabad Real Estate Bill 2020. The purpose of the bill was to regulate the real estate sector under the banner of RERA.
Earlier this week, on October 20th, 2020, (after almost a year) the National Assembly (NA) approved the Islamabad Real Estate Bill 2020. The objective of this bill was to regulate real estate under RERA. Initially, the regulatory body will establish appellate tribunal courts in order to resolve the ongoing disputes in the relevant sector. As we all know, real estate disputes in Pakistan are usually stretch over years and even decades due to the large number of people involved. There is a number of reasons behind these long delays. Sometimes lack of laws and sometimes lack of ability to follow it. The appellate tribunal courts will solve such disputes. If these will able to serve the purpose, this move will significantly boost the confidence of investors who are hesitant due to risk and fraud factors.
How the Real Estate Regulatory Authority (RERA) Works?
All real estate dealings are expected to be transparent under RERA. Realtors working in the sector will have to be registered with relevant authorities. This registration process will help to create a safe environment as the process will be affiliated with an official body. The deals will pass through authorities in selling houses, plots, or apartments.
All the stakeholders of real estate projects cannot only keep in touch with their customers but also monitor their internal company-level activities encompassing small and medium enterprises (SMEs). The developers will be asked to show their portfolio consisting of their previous work before taking new projects for different companies.
Furthermore, if any real estate agent or a corporate body fails to comply with the conditions imposed by the regulatory body, the RERA is also authorized to revoke their licenses. This will keep everyone on their toes to follow guidelines and official procedures.
RERA Conditions to Obtain License
In order to obtain a license from RERA, you’ve to follow the conditions below:
- A minimum threshold.
- After obtaining a license, any glitch in performance or signs of subpar standards can revoke the license of the involved realtor or agent as RERA has the right to revoke any issued license. This move will win the vote of confidence of investors.
- Conditions will have to be met and standards will have to be lifted just to obtain licenses.
Over the years, many Pakistanis are investing abroad. This reflects the unfriendly nature and complex procedures of the local industry. RERA has been established to figure out such complications and rectifying the landscape of the real estate sector of Pakistan. This will not only make Pakistanis invest in their own country but also encourage overseas Pakistani to invest back home for healthy returns.
Pakistan already earns a handsome amount annually due to foreign exchange through overseas Pakistanis, we can only imagine the flow of Foreign Direct Investment (FDI) and its positive impact on our economy once potential overseas Pakistanis begin investing in Pakistan’s real estate sector.
RERA will be the representative of the Government of Pakistan which will act as an advisor for the government in matters related to the real estate industry. it’s a comprehensive real estate regulatory body which will be in touch with the government regarding all housing societies, building, and other development projects.
The government is planning to establish another council which will have representatives from different bodies such as the Interior Ministry, Ministry of Finance, a secretary-level official from government-owned housing project Naya Pakistan Housing Program (NPHP), and the National Highway Authority (NHA). These people belonging to different bodies will take care of the affairs with diverse perspectives and help the team to be more versatile in nature.
Another fundamental move taken by the government is to subsidize the construction industry. This is a basic step which should be taken much earlier however it’s better late than never. The government has started to realize the potential of the construction industry which is a good sign. The progress of the construction industry means the growth of more than fifty linked industries including but not limited to cement, steel, timber, iron, marble, and tiles, sanitary, stones, electrical, glass, paint and varnishes, lightning, power, and gas, labor, horticulture, interior design and decoration, transport, construction machinery, plastics, fibers, furniture, etc.
The Government Policies
With the aim of giving a push start to the economy, the government has introduced policies to make the real estate sector progress.
- The government has launched the Naya Pakistan Housing Program (NPHP) back in 2018. The purpose of this scheme is to provide housing for low-income groups in society with affordable prices that are lower than the market.
- Low-cost housing of all types under the banner of NPHP is exempted from most of the fixed taxes.
- The first 1 lac houses to be constructed will receive a subsidy of Rs 3 lacs each. Loans are available with markup as low as 5% for 5 marla houses and 7% markup for 10 marla houses to make it convenient and affordable. (This information has been added for information purpose only, we never recommend or encourage our readers to go for any deal which includes mark up due to our religious obligations)
- Moreover, the prime minister Imran Khan announced the ‘Construction Relief Package’ worth Rs 100 billion. In this package, the government introduced a fixed tax mechanism for developers and builders and that too without withholding tax on transactions. This strategy will also encourage financial movements in the sector.
- Last but not least, all parties’ income and finances used in the construction industry will be exempted from disclosing a source of income. This will not only attract black money to move towards documentation but also encourage more activity in the sector. General sales tax (GST) has also dropped from 15% to just 2%. Again, this move is intended to encourage the convenient, worry, and hassle-free flow of finances in the real estate sector.
Just for a note, Banks were already told to keep aside 5% of their entire portfolio for this sector.