Laws & Reforms to Govern Pakistan Real Estate Sector
On top of that, the formal financial sector caters to around two percent of all housing transactions as informal flows from overseas Pakistanis and domestic black money keep speculative investments flourishing in private housing ventures. Due to which, key real estate operators made their fortune owing to a regulatory vacuum and inefficient revenue machinery, as both federal and provincial governments exploited the real estate sector in different way for political reasons. In the meanwhile, tens of thousands of naive investors lost their lifetime earnings due to scattered legislation and government bylaws in municipalities and local governments.
Due to all these things, the real estate sector in Pakistan has suffered from serious credibility challenges – low public confidence, unfair business practices, weak transparency and limited financial inclusion. All provincial governments failed to bring a booming sector into the real economy and pay even a fraction of what realtors earned. In 2016, Federal government introduced revenue measure through capital value tax and revised valuation of properties finally ended in yet another tax amnesty.
An overwhelming chunk of the housing schemes continue to be governed under the Cooperatives Societies Act of 1925, or specific acts of parliament for various development authorities like the Capital Development Authority (CDA), Defence Housing Authority (DHA), Karachi Development Authority and so on; with their bylaws governing the likes of Bahria Town.
The key regulators such as the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) have been directing the government to provide an overarching legal framework to bring these temporary investors into the formal economy. The government has now brought the property sector in the ambit of the Companies Act of 2017 that the National Assembly passed recently.
Section 456 of the said Act, which is yet to be cleared by the Pakistani Senate to become a law, would therefore be the governing law that would have precedence over all past laws and bylaws of provincial and federal development authorities.