Real estate sector strikes gold

Published September 12, 2021

KARACHI: The advent of Naya Pakistan seems to have set off a real estate gold rush as the number of newly registered companies in the land development segment grew 132 per cent in 2020-21.

As many as 1,794 real estate development companies were incorporated in the last fiscal year, up 2.3 times from 773 companies registered in 2019-20, according to data obtained from the apex regulator of the country’s corporate sector.

Additionally, the number of newly incorporated entities in the construction industry increased 54pc year-on-year to 2,698 companies in 2020-21.

The rapid rise in new registrations in real estate and construction sectors stems from “several incentives” by the government in the form of “amnesty schemes, reduction in taxes and increase in fund allocations for development as well as a 25pc decrease in the rate of capital gains tax on the sale of property for every subsequent year,” according to a spokesperson for the Securities and Exchange Commission of Pakistan (SECP).

SECP data shows 1,794 land development companies incorporated in 2020-21

In April last year, Prime Minister Imran Khan introduced a tax amnesty scheme that allowed people to invest their undeclared wealth in the construction sector without disclosing to the taxman how they earned that money in the first place. The scheme was valid for investing in new as well as under-construction projects for 10 months. Later on, the deadline for the amnesty was extended by another six months.

As a result, 1,321 people registered themselves with the federal revenue-collecting body to claim amnesty on funds amounting to Rs493 billion invested in 2,125 projects.

Major growth was also witnessed in the number of newly registered companies in IT (52pc) and trading (42pc) sectors in 2020-21, data showed. More than 1,000 companies were registered in pharmaceutical, textile, e-commerce and auto sectors last year.

Overall, the SECP registered 25,533 new companies in 2020-21, which brought the total number of registered companies to 145,913.

The SECP spokesperson said the year-on-year growth of 51pc in the number of incorporations was “unprecedented”. The number of newly registered companies has grown at an annualised rate of 32.5pc since 2016-17.

Of the 25,533 new companies, 99pc were registered online. One-third of them were registered within one day.

The spokesperson gave the SECP credit for the cumulative investment in Pakistani start-ups amounting to $258 million in the first eight months of 2020-21 — three times more than $77m investment that start-ups received in entire 2019-20.

“If the momentum continues for the next couple of years, annual investments in start-ups can reach $1bn by 2025,” the spokesperson said.

Foreign investments in established companies showed “notable increase” in 2020-21, he said, although official data shows direct investment from overseas investors dropped nearly 28pc last fiscal year. As many as 529 new companies received foreign investment while 21 foreign companies established “places of business” in Pakistan during 2020-21.

Published in Dawn, September 12th, 2021

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