Truth Behind Real Estate Myths in Pakistan
The Real Estate Sector and Our Future
In Pakistan, people generally believe in investing in real estate to secure their future. However, the previous government of Pakistan imposed heavy taxes on the real estate sector, which disturbed the whole business and nearly eradicated the real estate business in the country. Nevertheless, this sector adds to the economy of the country, according to the World Bank reports, and it adds 60 to 70 per cent to the country’s wealth, which is equal to approximately USD 300 to USD 400.
After agriculture, real estate is considered the biggest employment-generating sector in Pakistan. It energises not only the direct opportunities for employment but also other industries. More than 400 industries stimulate due to the real estate industry. They include cement, paint, steel, architects, urban planners, and building materials. All industries are equally benefited from real estate. Unfortunately, the government imposed heavy taxes in the last three years. This policy created a chaotic situation in the economy of the country. This economic crisis affected many people and affected their families.
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Over-Regulation of the Market
Due to FBR’s strict rules and regulations, investors do not invest in this sector. The heavy taxes imposed on property transfer, the ban on non-filers, and many other rules discourage people from investing in real estate. As a consequence, there is a lot of instability in the market. There is a myth regarding the real estate business that it makes a lot of money if you opt for it as an investment choice which is not true. In different countries, real estate helps the economy whenever in crisis. Unfortunately, it is impossible in Pakistan due to the rules of FBR.
The Post-2018 Real Estate Market
After the regime change in 2018, the real estate sector faced a huge downfall. It faced challenges from different perspectives, such as financial, political, economic, lack of confidence and policy issues. As many investors were overseas Pakistanis, the sector faced a huge recession initially. The Pakistani rupee also depreciated, which made the investment cheaper for overseas Pakistanis.
Investment in the real estate industry has become very insecure. Pakistan ranks 120th out of 129 countries worldwide, making it riskier for investment. Investors keep in mind the ranking before investing. Thousands of investors have shifted their investments to other parts of the world due to heavy taxes and uncertain policies. Other countries such as UAE and UK offer a higher return on investment that has attracted investors.
Overseas Pakistanis are more attracted to investing in the real estate industry as they cannot do other businesses easily. According to the State Bank of Pakistan report, Pakistan received 21.84 US dollars as remittances in 2019-20. If the government over-regularises the policies for the real estate sector, it will discourage the people who are investing in the industry.
The Future of Real Estate
There were high hopes for the growth of the real estate industry in the year 2020 alongside the decisions taken by the concerned authorities. However, the crisis is very big this time, which can create chaos in the real estate industry in big cities such as Islamabad, Rawalpindi, Lahore, and Karachi.
It is harmful to the real estate industry if the government increases taxes on such an industry that is helping the economy’s growth. The government needs to incentivise this industry and broaden the tax net. Looking at the current situation, the government needs to revise the policies for the real estate sector.
Points to Ponder
The government needs to formulate a simple, transparent, well-structured, and centralised system to replace the current doubtful and complicated legal system. In addition, the government should regularise and approve the industry as well.
Blog source: Real Estate Myths in Pakistan
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