Economist Richard Reed has said, “The real estate industry has historically been conservative in its approach to technology, and is slower to adopt new technologies than other industries.” However, in Pakistan, the approach of local realtors and developers has been outright negative to adopt technology in the real estate development and digitization of property management. The result caused a significant distortion in the real estate market and subsequent governments see it as an undocumented and unproductive sector. Now, digitization in real estate can lead this sector out of crisis and empower it to win the trust of higher-ups as well as the investors again. As the advent of Proptech (Property Technology) in the modern world is revolutionizing property management, verification, and transactions, shaping the sector into a documented economy.
Digitization in Real Estate with PropTech:
PropTech, in simple, is the application of information technology and platform economics to the real estate industry. However, if applied genuinely in Pakistan, it brings transparency to transactions, restores credibility of market, and earns a sizable revenue for the government. PropTech comprises many things related to real estate, including buying, selling, renting, construction, and property investments effectively and transparently. It is a groundbreaking advancement of technology that is bringing changes in every industry in the real estate sector.
Ongoing Crisis in Real Estate Business:
Recently, Asif Sumsum the present Chairman of the Association of Builders and Developers of Pakistan (ABAD) has announced to move the court against “heavy and unreasonable taxes” imposed on real estate in the federal budget 2024-25, terming it “very destructive” for the sector. According to him in the Budget 2024-25, “It is completely unfair to levy up to 60% tax and 3% Federal Excise Duty (FED) in the budget, while already 6-7% FED on the sale and purchase of property in place.”
It is important here to recall that Prime Minister Shahbaz Sharif in 2022 had dubbed real estate as a “non-productive” sector, being used only for speculative purposes rather than productive means. He called these speculations a “disservice” to the country. Therefore, he had hinted even then that the government primarily aimed at a sizable revenue collection via taxation in the fiscal budget to meet targets, given by the International Monetary Fund (IMF).
To a certain extent, the PM is right as real estate has failed to bring any positive impact on the socio-economic fabric of the country. No denying, it is the second biggest economic sector after agriculture in Pakistan and has been valued at & 1 trillion in 2024. But the amount isn’t moving the wheel of the overall construction industry and the bulk of the money is invested mostly in open plots and files in recent times. Besides, realtors across the country including ABAD have been reluctant to impose reforms like Real Estate Regulatory Authority (RERA) and land record computerization, which could make way for the digitization of real estate in Pakistan. It is now a must that both ABAD and the government join hands to digitize the real estate sector, reform it with the implementation of the RERA, and develop a central land bank. More importantly, the builders’ community should help, rather than resist, administrations in surveying and computerization of land records to bring transparency and smooth functioning in the real estate business.
Current Scenario of PropTech in Pakistan Regions:
Despite tall claims by the administration of each city and various governments, PropTech is still far away from seeing daylight anywhere in Pakistan.
- In Islamabad, the Chief Commissioner chaired a meeting this year in May to discuss the progress and future plans for automating land records. He only instructed officials to prioritize the adoption of modern technology and expedite the computerization of land records besides, the training of staff members to ensure the success of the initiative.
- In Sindh last year in October, caretaker Minister of Revenue, Industries & Commerce Mohammad Younus Dagha said that the Sindh government is starting digitization of land records of entire province. He further elaborated the clean-up of records in Karachi, Hyderabad, Jamshoro and Thatta has begun on a priority basis and the other districts will also be included in the follow-up.
- The Board of Revenue Punjab, with the technical & financial support of World Bank is preparing Punjab Urban Land System Enhancement (PULSE) project for the establishment of a unified central database of all types of urban properties (societies / authorities / development agencies), rights and charges. The project is still in preparation phase. In May this year, the CM Punjab issued directives to implement concrete measures for the digitalization of land records across the province.
- On the other hand, the federal government has finalized technical and operational details for providing online digital land record services to overseas Pakistanis through its foreign missions abroad and is set to formally launch the program next month, starting from Saudi Arabia, to attract foreign inflows. According to a news report published in March this year, this initiative will expand to other countries with large Pakistani diasporas such as the UAE, US, and UK within the next couple of months, followed by Spain, Italy, Canada, and so forth.
Let the PropTech get into the real estate business, it will streamline the sector and take it out of current turmoil.
By
Editorial, Infocus
