Real estate development projects are famous among the public due to their high growth potential, access to multiple facilities, and easy payment schemes. They usually offer many benefits and rely heavily on investor capital for development. Mostly, land in far urban areas does not have proper infrastructure for residential or commercial purposes, and real estate development projects are often the best way to utilise and prepare such lands for future economic development. Development projects can be of residential or commercial nature, but almost always, the appreciation in the price of the completed unit is far greater than any perceived risk for most people.
Land as a factor of production has immense importance. Everything that humans use can be traced back to land, and land can be rightly called the source of all human wealth. The economic prosperity of a country is strongly linked with the percentage of urban and rural land development. In the past few years, real estate projects have been rapidly growing in Pakistan. The residential segment makes up most of the real estate industry. Growth in this sector is primarily driven by an increase in urbanisation, a rise in the number of white-collar professionals, and rising incomes. With housing societies, apartment buildings, and shopping mall plaza’s being high in demand, many real estate developers have started advertising lucrative projects which aim to provide people with high returns and comfortable living standards, but due to scarce availability of land, and a multitude of legal challenges, many advertised projects do not fulfil the requirements of legitimate development projects. Often people get stuck by investing in such schemes and are left at the behest of those developers who seldom listen to their clients. Therefore, the regulation of real estate projects is required to ensure that no scams are advertised to the general public, and investors achieve more confidence while investing in real estate in Pakistan. which the Iqbal Institute of Policy Studies (IIPS) explains in this blog.
Challenges of Real Estate Projects
The process of manipulating, building, designing, and constructing new uses for real estate is known as development. As cities continue to grow exponentially due to overpopulation and rapid urbanisation, there is an increased need for housing, commercial activity, and urban infrastructure.
As land is a scarce resource, and cities are limited by boundaries, it is becoming increasingly difficult to buy homes and shops in main city areas due to high costs of living, transport, and food. Earnings in lower to middle-income families is not enough to buy housing, let alone the commercial sector. Therefore, a huge opportunity for real estate developers lies in building affordable housing, linked commercial projects, and infrastructural improvements.
Pakistan has also witnessed increased construction activity in the aftermath of the formal declaration of the construction sector as an industry. But there are several key issues with real estate projects in Pakistan such as a lack of proper and complete information, misleading advertisement campaigns, incomplete documentation, cartelization, and false representation of land ownership. While such projects are offered at mesmerizing rates and payment plans, usually, extra money is demanded in the form of development charges in later stages of the project.
There are also no dispute settlement mechanisms that can help the public in raising their concerns. Lastly, real estate projects rarely undergo quality control checks, and most people complain of substandard construction and poor planning of developed sites.
Regulation of Development Projects
According to the Islamabad Real Estate (Regulation and Development) Act 2020, no developer can advertise, market, book, sell, or offer for sale, or invite persons to purchase any plot, apartment, or building without registering the real estate project with the real estate regulatory authority. If any project is ongoing, and the completion certificate has not been issued, the developer is mandated to apply for registration.
If the project is developed beyond the planning area, an application for registration of the local authority will also be required. Also, no registration of a project will be required if the total planned area of the project does not exceed 500 sq. meters, or the number of apartments does not exceed eight. No registration will be required for projects whose completion certificate has been acquired, nor for renovation projects which do not require advertising or marketing.
The registration will require a fee along with undisputed ownership documents, legal authorization for the developer to carry out the project, specifications of the project in terms of residential or commercial use, details of his enterprise, details of projects carried out in the last five years, an authenticated copy of approvals and commencement certificates, a sanctioned layout plan, location details, carpet area, and names and addresses of contractors. If this system is implemented, it can be hoped that greater transparency in real estate projects will promote real estate investment while also ensuring safe delivery of products within prescribed time limits and budgets.