THE federal government’s decision to set up the Real Estate Regulatory Authority is expected to deliver effective and fair regulations in the country’s fragmented, undocumented real estate market. Prime Minister Imran Khan’s directive for the creation of the proposed authority has reinforced hopes that his government is serious about regulating the informal real estate market in order to realise its true potential and boost economic growth. The development of a robust regulatory framework is crucial to creating an enabling environment for a vibrant, secure and reliable real estate market, and the proposed regulator is vital to its smooth implementation. The success of the government’s fiscal and monetary incentives for the construction industry largely hinges on the early implementation of a transparent regulatory framework. The growth of a healthy mortgage industry is also linked to the enforcement of a clear regulatory framework to mitigate risks to creditors.
Pakistan’s real estate market largely operates in the informal economy and is plagued with numerous issues owing to the absence of an effective regulatory framework that could protect the interests of all stakeholders — buyers, sellers, developers, builders, tenants, etc. The lack of regulations often draws the stakeholders into long court battles over property frauds and ownership/tenancy disputes, repels potential investors because of unclear land titles and undermines public confidence in real estate. More important, tax revenue collected from this sector remains far below its true potential because over the past few decades real estate/property has become a haven for tax evaders to park huge amounts of illegal money. In recent years, the government has taken several measures to regulate the real estate market in order to document it and increase tax revenues. However, these steps have met with limited to no success owing to the absence of a coordinated effort, and a non-existent regulatory and policy framework to streamline the market.
So far the scope and coverage of the proposed authority remains unclear. Nevertheless, it is expected to introduce the country’s real estate market to international best practices so that it can realise its untapped potential. In addition to streamlining, harmonising and modernising tedious processes and laws related to land and property development, it will be required to enrol builders, developers and real estate agents to properly document them so that it can swiftly find a remedy to their problems, as well as to protect the rights of consumers and tenants. The new body will be expected to work closely with all stakeholders and act as a bridge between the government and private sector in order to formulate policies and develop strategies to bolster the real estate market by removing impediments. Once the government has delivered a transparent investment ecosystem and a real estate market regulated by an efficient body, it will not be difficult for it to attract much-needed foreign investors to this sector.
Published in Dawn, July 25th, 2020