Think tanks serve two major purposes: to present practical solutions to complex problems, and to spread public awareness. For real estate sector in Pakistan, we critically need both of these.
Real estate development sector is generally perceived as the backbone of the national economy. According to recent estimations by independent sources, Pakistan has an ever increasing potential of more than 1$ trillion in its commercial real estate development sector. In addition to being the second largest employer of the country, it is rigorously rising to be among those few investment sectors that have been technologically revolutionised over the last few years.
Almost half of the annual worker remittances go to real estate sector, which stands at around $10 billion to $12 billion, and $15 to 20 billion if transactions through non-banking channels are also considered.
Unsatisfying real estate sector
Unfortunately, an industry of such a stature neither offers ease of business to progressive real estate investors nor therefore contributes greatly to the national exchequer. Likewise, the sector has still to deliver a level of transactional ease and investment security, which we generally see in the world’s leading real estate markets.
In FY18, FBR could collect only 23 billion rupees from the industry, which is definitely a meagre sum of only 0.1% of the total size of the economy. It also included the exclusive tax amnesty package that brought substantial business to the market.
Currently, both construction and real estate transactions collectively amount for approximately 2% of the country’s total GDP, which unquestionably does not emit positive vibes.
On the other side, real estate analysts believe that almost every fourth client of the industry is unhappy with the transactional procedures of the business, in addition to market’s volatility, rising property prices and investment scams. The reason is ascribed to lack of professionalism and lack of clients’ interest in knowing their rights to information, who would ask questions when buying even a shirt but not when purchasing a property.
No policies means huge losses
All efforts to overhaul the industry are futile unless adequate policy research, analysis and advocacy are brought to practice. According to media reports, the temporary ban on constructing high-rise buildings in Karachi blocked an investment of as much as 1 trillion rupees to the sector, and brought dozens of enterprises close to bankruptcy.
Similarly, irrational swings in the market over the past seven years have caused the current house price to income ratio in Pakistan to be 20:1 against global standard of 5:1. Such an alarming disparity has taken even a modest shelter beyond the reach of almost 58% of the country’s population.
From an urban planning point of view, of the total 320,000 acres of Islamabad’s territory only 15-20 thousand acres have land laws. Since there is no research-oriented policy-making and implementation in the country in general and real estate sector in particular, the damage is irreparable and unstoppable.
Unfortunately, among the 25 Pakistani think tanks on Global Go to Think Tank Index, not a single one produces any insightful work on real estate, let alone taking it up as a separate research area.
A need for a real estate think tank
A real estate research centre or think tank could create high quality research on real estate investment performance and market fundamentals. The research would be academically rigorous and of high value to the benefit of real estate development and investment domains sectors.
It may also provide a platform through which the real estate professionals, public and private associations, FBR and other stakeholders could interact and exchange insights.
The think tank could adopt two major programmatic areas: extensive research and policy advocacy.
To start with, it could embark upon six distinct areas: global real estate, housing, investment, finance and risk, real estate innovation, and real estate price dynamics.
The think tank could either itself conduct a thorough academic research or could outsource it to academic institutions. Global mainstream universities like Cambridge University, Oxford University, MIT, University of Pennsylvania and others conduct extensive research in various areas of the sector; both as theses or dissertations requirements or purely as funded projects. The recommendations are brought to rigorous policy debates at public and private level.
The second area is policy advocacy.
It is welcoming that the government is considering establishing a Real Estate Regulatory Authority, which would create a mechanism for the sector to oversee investment, risks, transactions and reforms. The policy institute through research, analysis and policy advocacy could provide the authority with valuable insights on policies and its implementation; particularly, to the benefit of Naya Pakistan Housing Program and sustainable urban planning.
Real estate think tank models
Globally, real estate think tanks are affiliated with six categories: (a) autonomous and independent body, which operates in completed autonomy from government funding; (b) quasi-independent, which is autonomous from the government but is controlled by any interest group or donor that provides majority of the grants; (c) government affiliated, which could be a formal structure of any ministry or authority; (d) quasi-governmental, which is funded by government’s grants but does not work as its formal body; (e) university affiliated, which is a policy centre at any university; and (f) corporate (for profit), which operates on a for-profit basis and is generally affiliated with any corporation.
The proposed real estate think tank though could take any form, it would be better if it is affiliated with categories a, e and f.
I strongly believe that it is the high time to conceive and implement such an idea, as both the government and the private sector are eyeing for meaningful reforms in the sector. If you have any questions, or any suggestions and ideas you want to add to the topic, please feel free to leave a comment below.