Can Regulations help Boost the Real Estate Sector?


The real estate industry in Pakistan is experiencing a phase of mushroom growth. This blog by Iqbal Institute of Policy Studies (IIPS) presents the need for regulations in the financial, administration, land-use, and the environmental domain to assess the subsequent impact on real estate growth. After mentioning key issues and problems of the real estate sector in Pakistan, an analysis of the implications of such regulations on real estate will be presented. The blog also suggests vital areas of policymaking and regulation, which will eventually boost Pakistan’s real estate sector. 

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Research Questions

  • What are the problems of real estate in Pakistan?
  • What areas require regulation in Pakistan’s real estate?
  • What is the impact of regulations on the real estate market globally?
  • How can the real estate sector in Pakistan be revamped?



Pakistan’s real estate sector is a fast-growing industry with a vast potential to contribute significantly to the GDP. Due to a mostly undocumented real estate sector, many areas prove to be a bone of contention between the buyer, seller, developer, and state apparatus. Since real estate in Pakistan is usually considered an informal market, policymaking must cater to the administrative, financial, land-use, and environmental regulations. Efficient regulation is the key to realising the true potential of the market and boosting economic growth. The impact of effective regulation is mostly positive in the long run, even if the immediate results point towards a downward shift in economic development and investor interest. That is mainly due to a large amount of illegal money being parked in property and developmental projects. Pakistan has taken significant steps in the formation of a real estate regulatory authority, which aims to address a multitude of challenges across the real estate market. Therefore, regulating real estate can help in easing the processes related to finance, administration and development, thereby boosting the real estate sector and achieving economic growth in the long run.


Problems of Real Estate in Pakistan

The challenges associated with real estate in Pakistan are spread across multiple fronts. Ranging from poor documentation, fraudulent transactions, and flawed future planning, to a lack of policies and a regulatory framework. Until 2014, the sector remained untaxed with the state maintaining a no questions asked policy (Rashid, 2019). Pakistan’s real estate sector grew by 118pc in the last five years and is one of the least transparent or regulated in the world (Rashid, 2019). Buying, selling, renting, and developing land requires tedious planning and step-by-step execution of tasks.

An administration fraught with nepotism and corruption is the first impeding hurdle for new players trying to establish themselves in the industry. Lengthy processing of applications creates bottlenecks for development companies and disrupts the supply chain. When it comes to the litigation of land-related cases, the matter is exacerbated by incoherent land records and databases. Absence of incentives for investors also impedes Pakistan’s ability to develop its real estate sector and provide for revenue collection towards the GDP. Tax revenue collected from this sector remains far below its true potential because over the past few decades, real estate has become a haven for tax evaders to park vast amounts of illegal money. Until 2014, the sector wasn’t even taxed, turning it into an ideal destination to launder money and hike up prices through artificial bubbles (Rashid, 2019). Therefore, Pakistan continues to face serious challenges in its real estate sector, and the absence of a proper regulatory framework undermines public confidence in the sector.


Areas Requiring Regulation in the Real Estate Sector

The real estate sector requires many individuals, corporations, and state entities to work in collaboration with buyers, sellers, and developers. Financial services provide a backbone for smooth cash flow and equity in the market. Investor confidence takes a major hit due to the prevalence of fraudulent payments coupled with incomprehensive and poorly planned financing schemes for buyers and investors. Secondly, administrative issues take the utmost level of importance as much of corruption, and illegal practices take place due to lack of regulation in the process of documentation and filing of applications. Since buildings are not constructed to be demolished later, there is a pressing need for regulation of building construction and bylaws to ensure sustainable infrastructure. This is also important from the perspective of land-use design as the multifunctionality of land is a significant consideration in the modern-day and age. Lastly, the rapid development of agricultural lands and unplanned expansion of urban centres also impacts the environment. Regulations are required to minimise the environmental impact and costs of developmental projects in real estate growth. No doubt, there are many areas which need urgent attention of the authorities towards policy making, implementation, and regulation.


Pakistan’s Efforts Towards Regulating the Real Estate Sector

Pakistan has taken the much-needed step of passing the Real Estate Regulation and Development Bill 2019 under which the Real Estate Regulatory Authority (RERA) will be formed for effective management and oversight of the real estate sector. RERA will act as a consultant/advisor for the government in matters of real estate. This will include everything from housing societies to buildings to other development projects. According to the act, registration of real estate agents and development companies will be necessary before buying and selling property. Developers will have to seek approval from the authority before starting any new developmental project by providing details of past projects and advertising campaigns. Advertisers will also need to seek permission from the authority in order to promote any new development projects and investment opportunities on mainstream media outlets.

The Real Estate Regulatory Authority will also protect the rights of both real estate agents, and the individuals whom the property is allotted to. Civil courts will not take on the cases related to real estate disputes that fall within the purview of the RERA or appellate tribunal. Therefore, cases shall be decided in a period of 60 to 90 days in the purview of the authority itself. Pakistanis, over the years, have developed a reputation for investing in properties abroad. This can again be attributed to the unfriendly nature of the local industry. This can be fixed with all the development underway by RERA in rectifying the real estate landscape. Not only will this bring back real estate investment to Pakistan, but it will also, in due course, get overseas Pakistanis thinking about investing back home. A single window system for ensuring time bound project approvals will also help in timely completion of projects for greater investor confidence. Lastly, measures to facilitate digitisation of land records and financial transactions will go a long way in establishing a transparent and trustworthy system.


Impact of Regulations on Real Estate: A Global Outlook

A look at global trends on how the introduction of regulation impacted the real estate sector can provide an insight into the future of Pakistan’s process of regulating real estate. Compliance usually remains low in the initial years due to many cumbersome requirements needing to be fulfilled before the approval of current and upcoming projects. In the case of India, which recently adopted a similar act, there has been slow adoption and implementation of the law in true letter and spirit (Outlook Money, 2019). Also, in India, at the end of 2018, nearly 5,000 complaints were received, and over 3,100 orders passed. 79% of rulings were in favour of buyers. That should give us an estimate of the speed and the extent of buyer-protection that RERA offers (Outlook Money, 2019). Therefore, it can be concluded that compliance in Pakistan will gain momentum slowly as the capacity of the young authority will not be able to process the vast number of administrative tasks.


A study conducted in the European, real estate market shows that financially, there are positive and negative impacts. With the benefits of regulation, an increase in welfare and decrease in systemic risk and uncertainty can be seen. Regulations also make corporations more resilient to downturns. Tight regulation of banks increases market confidence in financial stability. On the other end of the spectrum, financial regulation can also be seen as a regulatory burden because it increases the cost of risk diversification, as well as operating and compliance costs, reducing the number of investors (Hoesli, Milcheva, & Moss, 2017). Looking at Pakistan’s highly underdeveloped financial sector, the impact of financial regulations will be seen in a boost to the industry by helping incorporate illegally parked cashback in the system. A rise in investor confidence will follow due to payments being made through proper documented channels. Therefore, financial regulations will prove to be beneficial for Pakistan in the long run even if some backlash is faced in the early stages of implementation.


Suggestions for Real Estate Sector

A strong future in the real estate sector largely depends on an early implementation of a transparent regulatory framework. Pakistan needs to urgently introduce international best practices to increase investor confidence and realise the true potential of the sector. As the country’s outlook changes over time, there might even be a chance that foreign companies start investing in developmental projects and offer better services to Pakistani citizens. Where land disputes and regulatory processes often take years to resolve, streamlining, harmonising, and modernising tedious processes and laws related to land and property development will enable builders, developers, and real estate agents to swiftly act on problems and issues of consumers and tenants. New regulations should be made by working closely with all stakeholders, keeping in mind the different needs and challenges of each stakeholder. State institutions should serve as a bridge between the government and all third parties involved following the model of public-private partnership. Lastly, robust strategies need to be developed to remove impediments for foreign investors and developers entering the market.  



Real estate holds great potential to revitalise and boost Pakistan’s economy. Lack of regulation in the administrative, financial, constructional, and environmental domains seriously affects the growth of the sector. But recent steps, such as the passing of the Real Estate Regulation and Development Bill 2019, provide impetus to future prosperity and development of the industry. If urgent steps are taken to introduce transparency and digitisation of land records, along with the speedy resolution of land cases, exponential growth in investment can be expected. Therefore, regulation is key to building sustainable development and reimburse investor confidence in the real estate sector.


Key Findings

  • Pakistan’s real estate sector is a significant and fast-growing industry with a vast potential to contribute significantly to the GDP.
  • The impact of effective regulation is mostly positive in the long run, even if the immediate results point towards a downward shift in economic growth and real estate investment.
  • Regulations can help in easing the processes related to finance, administration, and development. Thereby, boosting the real estate sector and achieving economic growth in the long run.
  • Success in the real estate sector largely depends on the early implementation of a transparent regulatory framework.

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