Why Real Estate needs Regulations: An Overview

The term ‘real estate’ refers to land, including the resources in and on it, and the buildings and permanent fixtures attached to it. Natural resources, such as water, that are on land are also considered a part of real estate. Although there are many benefits associated with a free market economy, there are many reasons why the real estate market should be regulated. Regulating real estate not only provides security to investors and other stakeholders but also allows for more sustainable growth in the sector, which is usually marred by periods of booms and busts.

invest with imarat

Islamabad’s emerging city centre

Learn More


A free-market economy is usually where buyers and sellers conduct business without any government regulation or minimum regulation at the least. This allows the forces of supply and demand to decide the projection of the market. Theoretically, the system allows for a balanced approach as the price of products is decided according to market needs, while chances of inflation or recession are reduced. But the land is not like other commodities as it has immense social, cultural, environmental, and economic value. High stakes are involved in the sale and purchase of land. Land development is also a high priority subject as future generations will rely on the planning done today. Another important aspect is the connectedness of many socio-economic issues with land and its access and land ownership. Lastly, due to the lack of regulations in the real estate sector, many malpractices have gripped the sector in the shape of investor fraud, housing scheme scams, and land titling and ownership issues. The real estate sector has massive potential in terms of GDP contribution, and therefore, it is time that regulations are devised to streamline many different aspects of the real estate sector to provide the consumers and real estate investors with more security and confidence, which the Iqbal Institute of Policy Studies (IIPS) discusses in this article.


The Real Estate Sector

With an influx of foreign investments and growing positive sentiments in the market, the Pakistani real estate sector is highly promising. Pakistani’s believe land to be a safe investment, and demand is on the rise. Also, conservative estimates put the current housing backlog at 9 million units, increasing by 300,000 units annually because of unmet demand. This shows that even if demand is rising, the sector is seriously overlooked by government authorities and the current rate of development does not come close to filling the market gap. The real estate industry came to a resounding halt in 2017 when a bevvy of financial, economic, and political challenges marred investor confidence. A lack of incentives, government policies to curb tax fraud, and political instability contributed to this stagnation. Despite the gloomy outlook in the sector, there are encouraging indicators. Pakistan has witnessed a marked increase of over 70 per cent in the tourism industry during the year 2019 (Ahmed, 2020). The World Bank has also ranked Pakistan 108th globally in its “Doing Business 2020” report (Ahmed, 2020). An improved business environment attracts foreign direct investment. Digital vision Pakistan 2019, aiming to improve the digital infrastructure and promote innovation, will also help overseas Pakistanis waiting for the digitalization of governance and tax systems. Lastly, CPEC is another mammoth development project that will transform Pakistan’s economy, and resultantly, the real estate sector will boom in the coming years.


Problems and Challenges 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. The 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. 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.  (Rashid, 2019)


The Need for Real Estate Regulation

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 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 the 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, many areas need urgent attention of the authorities towards policy making, implementation, and regulation.


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 property 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 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 to whom the property is allotted. 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 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 the timely completion of real estate projects for greater investor confidence. Lastly, measures to facilitate the digitisation of land records and financial transactions will go a long way in establishing a transparent and trustworthy system.



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.


invest with imarat Islamabad’s emerging city
Learn More
Scroll to Top
Scroll to Top