What needs to be done to make the real estate sector attractive to investors?
The real estate sector is in the limelight for the past couple of months, with the government pitching it as an engine of economic growth. The sector is also being seen as one with the potential to attract investment from local as well as foreign investors, especially overseas Pakistanis.
Last month, Dr Firdous Ashiq Awan, the special assistant to the prime minister on information and broadcasting, told stakeholders in the real estate sector that the PTI government was aware of its importance and was taking several initiatives to resolve its problems.
Awan added that under its ease of doing business plan, the government had introduced one-window operation and digitalisation of real estate data to bring in transparency and accountability and boost the confidence of investors. She surprised the participants when she said the government had plans to set up special tribunals for the real estate sector so that there were timely decisions in case of litigation related to property. Awan also said that the Prime Minister Imran Khan’s dream to provide shelter to the poor could not be materialised without the cooperation of the real estate sector.
These statements hint at the challenges faced by the players in the real estate sector. The toughest task they have to perform is to convince people that their investment will be safe, will bring them handsome returns, and is free of litigation and multiple ownerships, claims. Too often, they are made to make ‘dead’ investments that do not pay dividends despite passage of years. Over and above this, litigation and court cases haunt investors, especially those who are based abroad and cannot make frequent visits to Pakistan to contest them.
Why would an overseas Pakistani or a foreign investor be tempted to invest in the sector? One hears about all types of cases, many of them frivolous, draining the property owners’ money, energy and time.
The case of Fuad Qureshi, an expatriate Pakistani settled in Toronto, Canada, is typicals. His expensive properties in Defence Housing Authority (DHA), Lahore came under litigation when his brothers-in-law connived with his wife and claimed in the court that he had gifted these to her in an oral agreement in their presence. The case was entertained although there was no documentary evidence. The litigation took many years of his life.
Foreign investment cannot be attracted without cleansing this sector of such threats. This becomes more important in a scenario where the federal government has announced the new Blue Area project worth billions of dollars in Islamabad. Expecting that the required capital might be generated within the country amid economic slowdown is too optimistic an approach.
Shafiq Akbar, chairman of Graana Group of Companies, points out that it is the right time structural issues of the real estate sector in Pakistan are settled so that people can make transactions with full confidence. The most important thing, he says, is that the real estate data should be digitalised and prospective investors should have access to it. The scattered data and information, when consolidated, will help people assess actual worth of real estate assets, especially the commercial ones, in planned areas.
He says this is perfectly in line with the prime minister’s vision of a digitalised Pakistan the purpose of which is to increase people’s access to information and stop manipulation of data. Akbar, who is an overseas Pakistani and a real estate analyst with the experience of working abroad, believes Pakistan can become a top destination for real investment because it has a huge demand for housing. Conservative estimates put the housing backlog at 9 million units, which is increasing at 300,000 units annually because of unmet demand.
Apart from digitalisation, there are certain other issues that need to be tackled. For one, regulation of the real estate sector is quite lax; there is no penalty for those involved in frivolous litigation. Time involved in disposal of real estate-related court cases is long. People are not properly informed and follow advise of real estate agents who are themselves not qualified. Many a time concerned government authorities claim that such and such housing societies are illegal years after people have bought their plots and built structures.
Laws must be updated. There should be certifications and degrees in real estate education. Cases pertaining to real estate should be decided fast and those guilty of frivolous litigation must be punished. Those wronged should be compensated by the former to create deterrence. A good development as cited above is that the government plans to set up special tribunals but there is need for more to discourage property fraud at the initial stage. This can be done by developing a cadre of lawyers who screen properties for sale and clear them of any irregularities/anomalies. This happens in the UK where lawyers charge for this service and take full responsibility.
Wasif Khan, the chief operating officer (COO) at Imarat Group of Companies, says it is not an overstatement to say that the real estate sector can be the biggest engine of growth for the country’s economy. Industries like glass manufacturing, wood, steel, furniture, paint, plastics, electricity cables, cements, electronics etc are directly linked with the real estate, he adds. Therefore, he says, an increase in construction activity is bound to create employment and economic activity.
Gohar Majeed, a chartered account with interest in the real estate issues, is also hopeful that structural reforms will give a new life to this sector, which has been described as ‘non-performing’ in the past by the World Bank.
He says recent investments in the real estate sector like Changa Pani: Bhalwal did not create enough jobs or bring about a boom in the allied sectors as real buyers, who needed housing units, were driven out of the market. “The investments were made purely for short-term profits, mostly in empty plots, by those who had enough money to play and the ownership in properties would change hands many times within brief periods,” he adds. Majeed says if projects are completed in time, the real potential could be exploited very well. “Sound public policy with input from all stakeholders is the key to revival,” he concludes.
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