Roshan Apna Ghar: A home, back home
The Roshan Apna Ghar scheme is the State Bank of Pakistan initiative for non-resident Pakistanis to acquire properties in their home country. Under the scheme, overseas Pakistanis can complete their transactions remotely and digitally with their investment being fully repatriable. The non-resident Pakistanis can now purchase or obtain financing for houses in Pakistan through the Roshan Digital Account.
The Roshan Apna Ghar scheme will open numerous real estate opportunities and allied industries like construction and housing. Considering the potential of this new scheme, the Iqbal Institute of Policy Studies (IIPS) organised a webinar titled “Roshan Apna Ghar: A home, back home.” This blog presents the findings of the webinar.
Concept of Roshan Apna Ghar and the Vision Behind It
The State Bank of Pakistan launched the Roshan Digital Accounts to facilitate overseas Pakistanis in connecting with the banking system of Pakistan. Overseas Pakistanis contribute handsomely to the country’s economy through remittances. Last year, the country saw an increase in remittances by 20 per cent, making the total remittances received around 24 billion USD. Under the RDA scheme, more than 2 million non-resident Pakistanis have been registered with the banking system, and more than 1100 accounts are being opened daily. Moreover, around USD 11 to 12 million are being remitted to RDA accounts daily. In total, USD 2.3 billion have been received since the launching of the RDA accounts. A large share of these remittances has also been invested in the Naya Pakistan Certificates, an instrument that offers attractive returns on investments.
The Roshan Apna Ghar is an additional product under the Roshan Digital Accounts scheme. The aim is to provide a platform for overseas Pakistanis to invest in real estate digitally and remotely. The scheme also provides financing for purchasing or renovation of new or used homes in Pakistan. Traditionally, if overseas Pakistanis wished to invest in real estate back home, they had to come physically for market survey, inspection, and making transactions. With Roshan Apna Ghar, they now have the facility to request the bank to inspect and provide resources for investing in any property. Banks will be able to make evaluations and check the details of all beneficiaries, also confirming that no party to the transaction is on the UN’s terror watchdog list. If everything goes smoothly, the overseas investor can nominate any person to complete the sale and transfer of property on their behalf. Additionally, it must be kept in mind that all these processes are now digital.
Up till now, all the investments coming into the real estate sector of Pakistan were not easily repatriable. There were no formal channels to transfer money in case of maturity of investments. This created huge difficulty for overseas Pakistanis, and many remained reluctant to invest in real estate thereof. Investments made through the Roshan Apna Ghar scheme are completely repatriable even after a month. The only restriction is on the repatriation of capital gains which too can be sent after 3 years of making the purchase. This is mainly to stop speculation in the real estate market. However, there will be no restriction to use the capital gains to invest in stocks or other real estate projects. To further ease and facilitate overseas investors, a simple full and final taxation scheme will be applied to all transactions, limited to 1 per cent of the amount at the time of sale or purchase. The investor need not file any returns after that.
Under the Roshan Apna Ghar scheme, banks have already done their due diligence on critical real estate projects, which will be offered on their websites as pre-approved projects. These are projects where all approvals and ownership documents are verified along with the developer’s track record. Banks will assign a score out of 100 to each project, and the investor will have a choice to move ahead with any of the listed projects at relative ease. This process will provide much-needed comfort and confidence to overseas Pakistanis while investing in real estate. Another star feature of the Roshan Apna Ghar scheme is the financing aspect. Those NRPs who have invested in the Naya Pakistan Certificates and have significant cash balances in their Roshan Digital Accounts can take lien-based financing on homes and under-construction units. It will be a fast process as all applications will be digitally processed. The required documents are also very few, and transactions will be matured in a maximum of five to six days. Projects for these first groups can be financed up to 95 per cent of the value and at a rate of KIBOR.
There will also be the option to obtain normal mortgage financing from the banks for those who do not have investments in Naya Pakistan Certificates or cash balances in RDA accounts. The property purchased will be offered to the bank as collateral with financing rates at KIBOR + 1.5 per cent. This is the first time that under-construction properties will also be allowed for financing in Pakistan.
Obligations and Incentives of the Banking Sector
The incumbent government of Pakistan has given immense importance to the housing and construction sector. There is a huge demand and supply gap in the real estate sector, and the State Bank of Pakistan has partnered with commercial banks to make a product that will help boost the construction sector. Some of the welcome steps taken by the government include the amendment of foreclosure laws as commercial banks were reluctant to enter the housing finance sector; launching of a markup subsidy scheme on housing finance loans; setting up of a committee that meets on a fortnightly basis to address the challenges of the industry; development of income proxy models for informally employed people; standardisation of documents; e-tracking of applications; and ensuring a constant check on activities of the banking sector. A tremendous number of incentives and benefits have been given to developers and realtors.
The non-resident Pakistani market remains largely untapped. There is a huge potential in that market which is hindered by money laundering and counter-terrorism financing issues. The Roshan Apna Ghar scheme brings the necessary regulatory relaxations to boost investments in the real estate sector. By ensuring that no physical presence of the non-resident Pakistani is required, the banking industry has come up with a breakthrough in the sale and purchase of real estate. However, the scheme’s acceptability will remain directly proportional to the amount of investments in marketing the product. Efforts should be made to highlight the new scheme on international forums, digital marketing campaigns, social media, and participation in expos. Call centres can be set up to target non-resident Pakistanis directly. It can also be stressed that marketing alone will not achieve the desired results; effective handholding of non-resident Pakistanis will also be required to create environments that will enable and facilitate their understanding and adoption of the product. Banks can also hold Webinars along with the setting up of non-financial advisory services.
As a first step, existing RDA customers can be targeted. Memorandums of understanding can be signed with overseas associations of Pakistanis. However, the most significant impact will come from delivering a good customer experience. The spread of word of mouth will bring multiple people towards the product, and if banks are timely in providing their services, positive sentiment towards the product will be established. Banks must also try to digitise the entire process of investing in real estate from overseas. Complaint management is also another essential aspect of delivering a successful product. Lastly, there has to be an optimisation of processes involved, such as reducing stamp duties on mortgage creation, verification of documents be made easier, and reduction in the overall turnaround time. Therefore, by placing the customer at the heart of the process, it can be hoped that Pakistan will bridge the demand and supply gap in the real estate and construction sector.
On the incentives side, the real estate sector has tremendous potential. The financial inclusion of overseas Pakistanis in the banking system will be a gold mine for future products. As a tax on low-cost housing schemes has also been reduced till 2023, investments in these projects are becoming more lucrative for overseas investors. This means that there will be a more significant influx of remittances in the country, and banks will grow their balance sheets. The mortgage market is effectively non-existent in Pakistan and is still in its infancy stages. This provides an excellent opportunity for banks to engage with other allied sectors to develop a financial ecosystem in the country.
Incentives and Opportunities in the Real Estate Sector for Overseas Pakistanis
The Roshan Apna Ghar is the most significant initiative the government has taken to facilitate overseas Pakistanis. Using the Roshan Digital Accounts, non-resident Pakistanis can easily remit their money back to the country. And now, under the Roshan Apna Ghar scheme, they can also invest in the real estate sector remotely and digitally. They also have the option to obtain financing at attractive rates based on lien and n0n-lien traditional mortgages. Non-resident Pakistanis are the biggest asset of the country’s economy. Coming towards the real estate sector, more than USD 10 to 12 billion have been invested in the industry through remittances from overseas Pakistanis. The biggest challenge in doing so has been verifying multiple documents and the approvals required for the development of projects. The Roshan Apna Ghar scheme allows the industry to streamline the whole process.
In terms of recent positive developments in the real estate sector, cities are starting to implement bye-laws and develop master plans; a Real Estate Regulatory Authority (RERA) has now become an Act, the Prime Minister has provided a relief package for the construction industry, a fixed tax regime for low-cost housing projects under the Naya Pakistan Housing Program (NPHP) has been given, development and regulation of Real Estate Investment Trusts (REITs), and digital mapping of lands in significant cities all highlight the importance being given to this sector by the government. Therefore, the Roshan Apna Ghar scheme is in line with the Prime Minister’s vision to streamline investment in the real estate sector of Pakistan.
Coming towards the challenges in the real estate sector, more than 70 per cent of complaints lodged in the Prime Minister’s citizen portal app are to do with real estate. More than 60 per cent of all court cases in Pakistan also havethe to do with the real estate sector. Apart from these structural challenges, whenever non-resident Pakistanis invest in Pakistan, they do not find facilitation in their processes. Real estate is closely tied to the economy of a country. Only the construction sector is worth USD 750 billion, and development in real estate can create more than 15 to 20 million jobs in the allied sectors. However, for this to happen, the challenges of real estate must be looked upon holistically.
The biggest challenge NRPs face while investing in Pakistan is that they don’t have a verification system for the unit or plot of land they purchase. This is primarily due to a lack of planning, regulation, and access to information in the real estate sector. The Prime Minister’s step for digital cadastral mapping of all land units in major cities can become a revolutionary change for the industry. However, for projects like malls and apartment buildings, there should also be a verification system that ensures that the units being sold are also according to the approved layout plan. Implementing a Real Estate Regulatory Authority (RERA) will also be the first big step towards that process.
The Roshan Apna Ghar scheme is a positive step taken towards facilitating investments in the real estate sector of Pakistan by overseas Pakistanis. The program has multiple features which make investments very lucrative. The whole process can be digitally and remotely utilised. However, its practical implementation will depend on solid marketing campaigns, providing timely service, and handling complaints on a priority basis.