Real estate is potentially one of the most popular sectors for investors in the country– or outside it, as real estate is, unarguably, the most popular form of investment overseas Pakistan choose to make in Pakistan. Indeed, a large amount of remittances, the primary source of foreign exchange for Pakistan, are spent in investment in real estate. It also forms a large part of Pakistan’s economy, directly or indirectly boosting dozens of related industries and can provide significant revenue for the government.
Particularly since early 2010, the real estate’s growth has been phenomenal, bringing huge benefits for its investors, as luxury real estate projects sprang up around the country. Calls for regularisation of real estate has followed this rising growth and the governments have been making efforts to do just that. However, an aspect that has so far been ignored among the policymakers is the demand from the real estate fraternity that the sector be granted the status of an industry.
A look at how the industry status will impact the real estate will provide a better idea into why the demand exists and why it should be considered.
Why the industry status?
A look at the current situation of the real estate itself would be enlightening itself. The market has been slow for a while, at least it was until before the elections and prices had been either stable or decreasing. In Karachi, there are still other factors to play. Investors, in general, have been more cautious, so far. In this scenario, the hardcore realtors have been left to fend for themselves and get through the crunch situation on their own.
Defence & Clifton Association of Real Estate Agents (DEFCLAREA) General Secretary Johar Iqbal explained that right now realtors have a lot of capital in the form of plots – worth hundreds of millions of rupees with a large number of real estate agents who are located in Defence and Clifton itself. But those are just files, worth nothing without the demand. They are in a bind because they can do nothing.
If, he contended, the real estate had the status of an industry, and the realtors could get loans at the interest rates of 3%-4%, they could begin constructions of their project, get through the slow times and by the time the boom returns to the real estate, their projects will be ready and they will conveniently be able to return the loans as well. This will also create hundreds of thousands – potentially millions of jobs. As it is – without the status of industry – banks are not particularly keen to provide loans or provide them at much higher interest rates.
The general benefits of the industry status include:
Help with loans at KIBOR rates.
Access and representation in chambers of commerce and industries. This will certainly help resolve a lot of issues of the real estate sector more quickly.
Real estate will be regulated and registered.
With better documentation and industry status, approval system will become easier and more convenient for everyone involved.
Increased trust of real estate by the public.
Companies formed as result will help improve the situation for all stakeholders as well.
Companies will be able to create an extensive portfolio and join stock exchange and they will be able to sell shares and generate funds. Right now there are only real estate 4 companies, according to Johar, which are registered with stock exchange. He expected that number to increase more than 8 times.
Johar expanded on his argument in favour of the industry status by explaining that after passing through several stages of evolution, a third- or fourth-generation of realtors are now taking control of real estate. These are the educated lot with high level management and marketing degrees and they are contributing significantly to this country and its real estate. Moreover, people from all walks of life have attached themselves to real estate. It is only fair that the industry be given a status that will help it grow further – simply for its contribution to public itself.
Moreover, if Pakistan’s realtors are to compete with the international realtors – and they can – this is going to be inevitable, Johar felt. The government is looking to tax real estate, it is only fair that real estate reaps benefits from the government too!
Do you think real estate should be given the status of an industry? What’s your opinion on the matter? You can talk to us in the comments section. You can also head to the Zameen Forum to start a detailed discussion on the matter.
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Muhammad Farhad
Muhammad Farhad is a Content Developer at Zameen.com.
