Real Estate Regulatory Authority (RERA) – Transforming Real Estate Landscape in Pakistan
Pakistan is a country with limitless growth opportunity in all sectors. The economy is growing and the government is subsidizing sectors that have high positive cyclical effects. However, age-old practices in the real estate sector prevent it from flourishing beyond a point that was reached decades ago. In other words, things are stagnant.
At the moment, the industry is categorized by fraudulent realtors and malpractices. People employed in the real estate sector look at investors as cash cows. The current idea is to make as much profit off a deal than to execute a good deal that will attract other potential investors. There is no transparency, i.e. is complete disclosure of information on finances transactions and commissions are high, crossing all ethical boundaries.
Conclusively speaking, Pakistan ranked 75th on the Global Real Estate Transparency Index, which was an upward jump of about 15 places. However, there is still a vast room for improvement and development.
Pakistan gets a sizable portion of its Gross Domestic Product (GDP) and economic activity from this sector, hence, revamping it will do wonders.
Realizing this, the federal authorities under the Government of Pakistan (GoP) established Real Estate Regulation and Development Bill last year. Under this, the ‘Real Estate Regulation Authority’ (RERA) was formed.
This was the main reason why Pakistan improved on the Global Real Estate Transparency Index as stated earlier.
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. For starters, the authority is to form appellate tribunal courts that will solve ongoing disputes in the concerned sector. Real estate and property disputes have tendencies to stretch over years and at times over decades especially in Pakistan with large groups of people and families involved. Whether this is due to lack of law or the lack of ability to follow it, appellate tribunal courts will solve everything. This will boost confidence in the observing investor who is hesitant to risk his/her funds.
What is the Real Estate Regulatory Authority (RERA)?
Under RERA, all real estate dealing will be transparent. Agents operating in the field will have to be registered with concerned authorities. This registration may very well serve as a quality attestation/affiliation with an official body so the investor can feel safe with their money as agents will have to pass their deals through authorities in selling houses, plots or buildings.
Stakeholders here are not only confined to individual customers but company level activity will be monitored encompassing Small and Medium Enterprise (SMEs) or corporate level customer/party. The developers have been ordered to show the details of their past projects before taking up new projects for companies. So much so that adverts will also be filtered through the authority’s lens.
Not only this, but RERA will also have the authority to revoke licenses should an agent or a body fail to comply with their conditions. This will keep all employed in the sector in check even after obtaining licenses.
Conditions to Obtain Licence from RERA
To begin with, obtaining a license will have conditions;
- A minimum threshold.
- Conditions will have to be met and standards will have to be lifted just to obtain licenses.
- Once obtained, any slack in performance or signs of subpar standards will give RERA the right to revoke the obtained license keeping all involved in real estate to uphold moral and ethical values. This will yet again win the vote of confidence for investors.
Pakistanis over the years have had a reputation for investing abroad. This can again be attributed to the unfriendly nature of the local industry. This will be fixed with all the development underway by RERA in rectifying the real estate landscape. Not only will this bring back investment to Pakistan, but it will also, in due course, get overseas Pakistanis thinking about investing back home!
Considering the huge amount of foreign exchange our economy earns thanks to overseas Pakistanis sending money back home, one can only imagine the flow of Foreign Direct Investment (FDI) and the purchasing power parities when it comes to investing in real estate in Pakistan.
RERA will act as a consultant/advisor for the government in matters of real estate. This will include everything from housing societies to buildings to other development projects.
Another council will be established, comprising of representatives from the Ministry of Finance, Interior Ministry, secretary-level officials from the Ministry of Law and Justice and focal people from the Naya Pakistan Housing Program (NPHP) and the National Highway Authority (NHA), to look after all affairs through a different and diverse perspective with the team being more versatile in nature and style.
The government is subsidizing the construction industry as well which is a very basic component of the real estate industry. The government tapped into the potential of the construction industry, which, in turn, drives more than 50+ allied industries, including cement, iron, steel, timber and wood, marbles, tiles and stones, electrical and sanitary works, glass, paints and varnishes, electrical lightning, power and gas, horticulture, interior decoration, transport, light-heavy construction machinery, plastics, fibres, furniture, electrical appliances, etc. to kickstart developmental activities and the economy.
The policies introduced by the Government
In order to push the economy, the current government introduced policies to push the construction sector towards further development.
- Back in 2018, the government launched the Naya Pakistan Housing Program under which housing for the low-income groups in the society is offered at affordable rates.
- Low-cost housing of all sorts within the program is exempted from 90% of fixed taxes.
- A subsidy of Rs 3 lakh is given to the first 100,000 houses constructed/to be constructed. Loans with mark up as low as 5% for 5 marla houses and 7% markup for 10 Marla houses are offered to make it easier in terms of affordability for the desirous.
- In addition, Prime Minister Imran Khan unveiled the ‘Construction Relief Package’ worth Rs100 billion, under which the government introduced a fixed tax regime for builders and developers, with no withholding tax on transactions, thereby encouraging financial movement within and with the respective sector.
- Lastly, all parties’ income and finances used in the construction industry will be exempted from providing a source of funds. This will encourage more activity in the sector. General sales tax dropped from 15% to just 2% again encouraging an easier and relatively worry and hassle-free flow of finances in the industry.
Banks were earlier told to keep aside 5% of their entire portfolio for this industry also.
Imarat Group of Companies
Imarat Group of Companies – being one of the pioneering innovative real estate groups practising in Pakistan has an eye out for all the opportunities springing up in this sector.
It is striking the lead to make good and rightful use of the newly created investor confidence in the real estate landscape of Pakistan. It gives these investors not only the right guidance and direction to invest in, but also top-notch investment options.
It is involved in multiple mega projects – Florence Galleria, Golf Floras, Amazon Outlet Mall, Mall of Arabia, Imarat Builders Mall, to name a few – that are some of the hottest selling projects in the twin cities and are achieving the desired returns promised to the investors.
It won’t be wrong to say that it’s projects like these initiated by Imarat Group and its innovative practices that the government-subsidized the construction sector and also formulated RERA as it senses lots of potential in the sector.
There is a lot of promise in this whole ordeal however the true extent of benefit will only unfold with time.
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