Ayesha Saba

The government’s recent decision to establish Real Estate Regulatory Authority (RERA) is seen as a crucial step toward reforming Pakistan’s real estate market. Experts said that if implemented transparently and backed by strong institutional support, RERA can play a pivotal role in curbing illicit financial activities, increasing government revenue, and restoring investor confidence in the property sector.

Talking with WealthPK, Dr Shahid Khan, a macroeconomist at the Centre of Business and Economic Research (CBER), Institute of Business Administration, Karachi, said that the establishment of Real Estate Regulatory Authority can significantly reduce tax-evasion if it is accompanied by stringent enforcement measures. He noted that real estate transactions in Pakistan have historically been marred by under-invoicing, benami properties, and speculative pricing, all of which contribute to an artificial increase in property values.

By enforcing proper documentation and valuation mechanisms, it could discourage these malpractices and bring more transactions into the formal economy, thereby improving tax compliance and government revenues. However, he stressed that the mere establishment of an authority is not enough; its operational independence and institutional oversight will determine its effectiveness. Dr. Ikram-ul-Haq, a tax expert, highlighted that the regulatory authorities in Pakistan have often struggled due to political interference and weak enforcement mechanisms.

He suggested that the authority must have strong legal backing, ensuring that it can function independently without external pressures from powerful real estate lobbies. “If the authority is empowered to monitor transactions, verify ownership records, and coordinate with tax agencies, it will go a long way towards reducing the illegal wealth accumulation in the real estate sector,” he asserted. Talking to WealthPk, he said one of the major challenges in Pakistan’s real estate market has been a lack of transparency, which has discouraged legitimate investments.

He explained that foreign investors and overseas Pakistanis often hesitate to invest in real estate due to concerns about land encroachments, unclear property rights, and fraudulent dealings. By establishing authority, the government can create a structured environment where property transactions are conducted fairly, ensuring that investors have legal recourse in case of disputes. He advised that the government should implement RERA in phases, allowing time for stakeholders to adapt to the new requirements.

He added that incentives such as tax benefits for compliant developers and clear guidelines on property registration can help facilitate a smoother transition. According to the sources, the IMF urged Pakistan to take firm measures against property value misdeclaration. The government has assured the IMF of activating the Real Estate Regulatory Authority, which will be empowered to impose strict penalties, including imprisonment and fines, on individuals and agents providing false property valuations.

Credit: INP-WealthPk