Navigating Pakistan’s realty challenges

A country’s economy often relies heavily on a dominant sector that shapes its overall economic landscape.

While agriculture remains the leading contributor, the real estate sector also plays a crucial role in Pakistan’s economy, contributing approximately 2 percent to its GDP.

As urbanization accelerates, the demand for residential, commercial, and industrial properties continues to grow.

However, Pakistan’s real estate sector stands at a crossroads, presenting both significant potential and substantial challenges. Over the past decade, it has attracted various foreign investments for development projects.

Also, a significant amount of foreign remittance is sent by overseas Pakistanis investing in the country. Several challenges, however, must be addressed to fully realize the sector’s potential, particularly in attracting foreign investment. As Pakistan strives to position itself as an attractive investment destination, it must maintain a balance between welcoming foreign capital and safeguarding national interests.

The ambiguity, lack of transparent policies and inconsistent regulatory frameworks in the real estate market often deter investors, who are wary of the unpredictable legal landscape.

The federal government budget of 2024-2025 introduces changes to real estate taxes that will impact both sellers and buyers in the market. Previously, as per the speech by Finance Minister Aurangzeb, the filers will now face a 15 percent tax rate on the purchase and sale of property, whereas the non-filers will be taxed at a rate as high as 45 percent for similar transactions.

Additionally, separate tax rates have been introduced for the filers, non-filers, and late filers regarding immovable properties. The government claims these drastic changes will regulate the real estate industry and help reduce tax evasion. The expected boost in government revenues will help it achieve its target of generating 477.11 billion.

However, sudden changes in taxes or policies related to key investment sectors without consulting the market stakeholders can cause issues even if revenue goals are successfully met.

Over the years, Pakistan has attracted many foreign direct investments in sectors like telecommunications, energy, technology, agriculture and consumer goods. The real estate sector has shown tremendous growth with foreign investments reaping huge profits.

However, the levels of FDI have fluctuated due to security concerns, political instability, bureaucratic hurdles, unplanned urbanization and an inconsistent business environment.

As a result, there has been no foreign investment in real estate projects in Pakistan since the project by Egyptian investors, until the recent investment by a British investment group. It was crucial to address the concerns of higher interest rates to achieve the true potential of the real estate industry.

Pakistan also receives substantial remittances from its diaspora across different regions of the world including the Middle East, Europe and the US, which play a crucial role in supporting the economy.

Over the past two decades, various housing projects have been launched, offering returns of 10% to 40%, making them the highest among any sector for investment. Climate-resilient housing is essential to tackling the challenges posed by climate change.

Primary focus should be on utilizing sustainable, locally sourced materials to minimize environmental impact. This approach not only aligns with local needs but also fosters a sense of ownership and promotes long-term resilience.

The rapid proliferation of housing societies across Pakistan particularly those targeting overseas Pakistanis through online platforms has raised some significant concerns. The government should ensure that all stakeholders, including investors, developers, and buyers understand and comply with the legal framework governing property transactions.

Factors such as informal transactions, undeclared assetsand tax evasion through under-invoicing can distort market dynamics. Inconsistencies in property valuation and limited access to reliable data hinder efforts to achieve transparency.

Also, the prevalence of fraudulent schemes has instilled a sense of reluctance and uncertainty among investors.

To encourage citizens to invest in projects and businesses rather than relying on savings accounts, governments must prioritize education and awareness campaigns that highlight the importance of money circulation for economic growth.

Governments should promote financial literacy by organising workshops, online resources, and partnerships with financial institutions to ensure citizens understand the long-term advantages of productive investments over idle savings, ultimately contributing to a vibrant and resilient economy.

By addressing regulatory, economic, and infrastructural issues while leveraging opportunities presented by initiatives like CPEC (China Pakistan Economic Corridor) and the rise of the middle class Pakistan can attract substantial foreign investment. Thus, spur economic growth and transform the real estate landscape in the country.

The establishment of Special Investment Facilitation Council (SIFC) in 2023 was aimed at increasing foreign direct investment in the country, thereby boosting investor confidence.

Stakeholders from different sectors, especially in real estate, believe that the investment-driven approach of SIFC can lead the country out of the current economic crisis. Recently, SIFC’s positive impact has been evident, especially in the way it facilitated Egyptian investment’s long-awaited approval for the motorway interchange.

While Pakistan’s real estate sector faces several challenges, the potential for growth and lucrative returns remains significant.

Strengthening regulatory frameworks is essential to ensuring consistent standards, enhancing enforcement mechanisms will guarantee compliance and deter malpractices.

Promoting digitalization and data transparency can streamline operations and provide stakeholders with accurate information, thereby boosting efficiency and trust. Fostering a culture of accountability and integrity within the industry is crucial for long-term success, as it builds credibility and encourages ethical practices. By focusing on these areas, a more resilient industry landscape can be created.

It’s crucial for the government to act swiftly on the proposed relief package for the real estate sector to stimulate economic growth effectively. By implementing tax relief measures such as reducing property transaction taxes and abolishing the federal excise duty, the government can significantly boost real estate activity.

This initiative not only encourages increased investment in the housing market but also generates employment opportunities and fosters business growth.

Moreover, aligning with the housing agenda will ensure sustainable development in the sector, contributing positively to long-term economic stability and prosperity.

Pakistan’s real estate challenges require a multifaceted approach that combines innovation, sustainability, and community engagement.

As an industry expert, this writer firmly believes that collaboration between the public and private sectors, along with proactive citizen participation, is the cornerstone of this transformation. Together, we can unlock the true potential of Pakistan’s real estate sector, ensuring it thrives as a key driver of national development.

Copyright Business Recorder, 2025