by Muhammad Faiz Kidwai
Architect , REIT Specialist & Social Impact Entrepreneur.
Real estate is one of Pakistan’s most lucrative and appealing business having vast potential for growth, high returns & ever increasing demand. Dominated by the residential sector, the real estate market is projected to reach a market volume of US$2.41 trillion by 2029, per Statista Market Insights. Notably, the Compound Annual Growth Rate (CAGR) is expected to increase by 3.82% from 2025 to 2029. This sector offers investors, entrepreneurs, and real estate professionals attractive opportunities. However, the industry has seen scandals, fraud, and exploitation. Unfortunately, it has also experienced speculation, market volatility, property scandals, and corrupt practices like betting perpetrated by a closed clique who views the sector as a farcical currency market.
The dark history is underscored by the recent statement of the country’s finance minister Mr Muhammad Aurangzeb, who referred to the real estate sector as ‘the plots and files business.’ This term highlights the culture of buying and selling “plot files,” documents representing promissory pieces of land rather than the actual plot itself. This method allows housing society owners to potentially profit as the files are sold at inflated prices before the plot is or at all physically available to sellers.
To make money quickly, investors buy and sell properties without considering the project’s long-term viability and sustainability. Likewise, small investors pay for their savings gracelessly, while experienced speculators and large players make money. This has led to market volatility, price bubbles, and heavy investor losses. So, small investors usually experience significant financial losses whenever the market fluctuates, yet experienced speculators and large players profit from such events.
Moreover, Pakistan has consistently maintained a dismal record regarding land and property scandals arising from corruption and inefficiency. To grasp this issue, let us examine a few notable scandals. The Evacuee Property Scandal represents a dark chapter in Pakistan’s history. Following the partition of India and Pakistan, millions of Hindus and Sikhs migrated to India, leaving behind their properties and assets. However, the Evacuee Trust Property Board (ETPB) has been allegedly involved in various land-grabbing cases. Land grabbing refers to the unlawful acquisition of land. Forced evictions and fraudulent documentation exacerbate these issues, further destabilizing the sector. Time and again, impoverished and vulnerable communities have been forcibly displaced from their homes and land to accommodate luxury developments and infrastructure projects. Similarly, corrupt officials & all beneficiary participants have fabricated false documentation, including property deeds and ownership records, to facilitate land grabbing. Thus, Pakistan has been plagued by land grabbing and corruption for decades, hindering its economic development and perpetuating social injustice.
Certain factors and players facilitate corruption and malpractice, including collusion and nepotism. For example, influential people have engaged in nepotism to obtain land and property below market prices by receiving favorable treatment from the authorities. Such malpractices are possible because of the system’s lack of trust, the power of economically irresponsible commercial media, and a weak judicial system. Likewise, collusion between influential individuals, government officials, and weak legal frameworks has also contributed to these malpractices.
The consequences of land grabbing and corruption are serious. These include the displacement of communities, the loss of public revenue, and the diminishing of trust. Land grabbing impacts communities in several ways. A significant number of the people are forcefully evicted from their ancestral lands, leaving them with their livelihood and cultural identity destroyed. Likewise, it has environmental consequences since fertile agricultural or forest land is being converted to commercial development.
Although the list of corrupt practices in real estate is long but one more important area to mention is where NOCs are issued for a specific project for a limited number of inventories while what’s sold is multiple times more. There are many examples where a NOC is obtained on a relatively small piece of land while the selling is done in unbelieve proportions. Despite being extensively publicized and marketed locally and internationally, projects with malicious intentions continue unchecked. The pervasive presence of vested interests at all levels discourages intervention.
Regrettably, Overseas Pakistanis are disproportionately affected by these malicious projects. Compounding the issue, Pakistani embassies in these locations often remain silent, leaving victims without recourse.
Government officials, media & judiciary have largely ignored these irregularities, and investors have little choice. It has also enabled scammers to phish with confidence.
Lack of centralized and foolproof land registers and digital databases are critical factors plaguing the system further. Without a systematized digital database, it has also been challenging for investors to verify property ownership, contributing to rampant land grabbing and fraud. The undue power and influence of ‘Patwaris’ (Junior Revenue Officers) in holding land records facilitates corruption. Despite the digitization of land records in some parts of the country, corrupt elements have outsmarted the system in many ways.
Pakistan’s economy has also been facing the issue of real-estate tax evasion for a long time. It has been estimated that real-estate tax evasion costs the economy Rs. 500 Billion or more, which shows the gravity of the issue. The economy is constrained from the widespread use of black money in real-estate. Notably, legitimate money can turn into black money due to external pressures. To illustrate, when people are compelled to underreport their income or assets, often to evade taxes or due to systemic pressures, their legal earnings become black money because they are not properly declared.
The Solution:
A multi-dimensional approach is required to transform Pakistan’s real estate into a sustainable and effective business sector. Regulatory reforms, technological solutions, and modern practices must be introduced hand in hand. Proptech is the application of technology to improve the real estate industry’s efficiencies, transparency, and customer experience. Real-time data and insights from Proptech platforms allow buyers, sellers, and investors to make such decisions with the information available. The term ‘Proptech’ involves a range of technology initiatives, including digitization of real estate, Project Information Management, etc. The strategic use of Proptech in a situation riddled with corrupt practices can enhance the credibility of a property, making it more attractive to potential buyers, investors, and users. Interestingly, it facilitates potential customers by offering an interactive experience whereby they can access their properties remotely. They can view the property’s layout, features and conditions, reducing the risks of misrepresentation and fraud.
The digitization of documents has the potential to revolutionize Pakistan’s real estate sector by significantly reducing the risk of fraud. A successful example of this transformation is the Sangar Housing Scheme in Gwadar, Balochistan. Digitized in 1996, this project on 2700 acres of land was Pakistan’s first-ever attempt at digitization, showcasing the power of what today is known as “Proptech”.
It also serves as a shining example of the age-old adage: ‘where there’s a will, there’s a way’. Sangar, has for over the past three decades been withstanding corrupt environment, political pressures, and social influences; yet consistently maintained trust & credibility because of use of technology. The achievement demonstrates almost 3 decades of continuity in leadership, determination & resolve by the numerous Deputy Commissioners (DCs)/Project Directors; who ensured the system remains on track.
Digitization enables the creation of a consolidated database, streamlining real estate transactions and increasing investor confidence. To fully harness the potential of digitization, Pakistan needs to prioritize the digitization of land records. This will require a concerted effort from the government, regulatory authorities, and all stakeholders in the real estate sector. By working together we can create a more transparent, efficient, and secure real estate sector, driving economic growth, trust and development.
Automation and digitalization can streamline processes and decrease paperwork while improving the customer experience. The platform provides personalized services, virtual tours, and online transactions, making it easier for customers to interact with the real estate market.
In order to further ease out real estate market there has been many alternate options to conventional development and one of them is real estate investment trust (REIT). It reached out investors to make more secure investments by buying and selling shares. They are mutual funds that invest in properties and real estate and generate income from such investments for their unit holders. Moreover, they are regulated so that all investors can be assured of complete transparency, accountability, and protection. Investing in these funds enables investors to diversify their portfolios, reducing the risk and enhancing the potential returns. Thus, REITs can invest in all sorts of commercially viable and sustainable projects where tangible benefits can come for the investors.
Though Pakistan’s land and property sector is riddled with corruption, the real estate investment experience REITs offer is much different. Small and medium level investors can play on high-value properties with REITs at minimal risk. They are effective by pooling the funds of multiple investors into a diversified portfolio of properties to mitigate risk and enhance potential returns. Furthermore, they generate regular income streams by distributing a large portion of their income to shareholders. Additionally, REITs are regulated strictly to maintain transparency and accountability. As professionals manage them, there is less risk of poor management. So, all levels of investors can quickly buy and sell shares of REITs.
Use of technology in REIT can also support :
- Enhancing REITs’ property management capability, improving efficiency and reducing cost by implementing a digitalized property management system.
- Providing data insights for REITs will facilitate data-driven decision-making and optimize the portfolio’s investment performance.
- Increased transparency and improved investor’s experience in REITs through user-friendly investment and portfolio management platforms.
REITs and Proptech can also resolve the issue of tax evasion and black money to a certain extent. As regulated investment vehicles, investors channel their funds through REITs through documented financial transactions, reducing the potential of black money in real estate. Furthermore, REITs require investments through legal banking channels, making it harder to use undeclared income. As regulated entities, REITs are subject to favorable tax regulations that also ensure proper reporting , so the possibility of concealing earning is reduced significantly.
REITs can include almost all sectors beyond traditional residential and commercial properties. These include hospitality, tourism, agriculture, infrastructure, healthcare, education, renewable energy, and specialized REITs. Some interesting examples of REITs from across the globe include Farmland Partners REIT, Apple Hospitality REIT, Tower REIT, GLP REIT, and Renewable Energy REIT. Apple Hospitality REIT is a company that invests in real estate and is traded on the stock market. It owns a large and diverse collection of upscale hotels across the United States. The company’s portfolio includes 220 hotels with about 29,700 rooms in 85 different cities across 37 states and Washington, D.C. Similarly, Farmland Partners REIT (USA) is a publicly traded company that owns and manages farmland across the United States. It earns income by leasing farmland and selling crops. As an internally managed real estate investment trust (REIT), it focuses on acquiring and operating high-quality farmland across North America. Its stock is listed on the New York Stock Exchange. These examples demonstrate that REITs have a strong potential to address the current malpractices faced by various sectors of Pakistan.
The Securities and Exchange Commission of Pakistan (SECP) is making remarkable efforts to promote REITs in Pakistan by providing practical solutions to RMCs and developers to start REIT projects. The government has also given REIT tax concessions to attract investors. Therefore, SECP and the government are taking positive measures to make Pakistan’s real estate sector more efficient, transparent, and investor-friendly to grow, innovate, and propel economic development. These measures will enhance its credibility and attract local and international investors, which will, in the long run, lead to growth and development.
It should also be noticed that if practiced properly fractional property ownership powered by PropTech, can also address the challenges of malpractices. Fractional ownership solutions require digital transactions and proper documentation, making transactions more traceable and tax-compliant. Likewise, fake property documents and illegal transfers can be minimized through block chain and smart contracts. Currently, real estate investment in Pakistan is dominated by large investors and developers, who often engage in speculative activities and price manipulation. Fractional ownership solution, on the other hand, allows anyone to invest small amounts in property through PropTech platforms, which has the potential to break monopolies.
Apart from these measures, Pakistan needs to set up a Real Estate Regulatory Authority at both the national and provincial levels. This organization would create and enforce rules, protect buyers, settle disputes, and ensure that quality projects are completed on time. If decisive and unbiased actions are taken, free from the control of powerful individuals, the real estate sector in Pakistan could improve rapidly.
While Proptech and REITs present a winning solution, a new generation of developers can act as game changers by introducing innovative ideas, credibility, and grassroots-level investor engagement. They have the potential to significantly contribute to the sustainable development of Pakistan’s real estate industry. Consequently, meaningful initiatives can lead to revolutionary changes in the country’s socio-economic landscape, and value-added REITs can enhance the sector’s success. The overall growth of REITs in Pakistan holds substantial potential to transform the real estate sector and foster economic growth, development, and job creation. As Pakistan’s real estate sector continues to reach new heights, REITs are poised to play a crucial role in the industry’s future. By embracing REITs, we could cultivate a more stable, sustainable, and investor-friendly sector that benefits all stakeholders, including investors, developers, and the broader economy. The REIT platform is not intended for traditional land speculators or gamblers seeking short-term gains. Instead, it is designed for genuine developers, real investors, and stakeholders committed to a long-term perspective on sustainable and responsible real estate investment practices.
In conclusion, the convergence of Proptech, REITs and cutting-edge innovations will be a game changer……Revolutionizing Real Estate Investment in Pakistan.
