This report argues that the real estate market and allied construction industries have a pivotal role in economic development and jobs creation. Together, they constituted 9.2 percent of GDP, and created 3.85 million jobs in 2014-15. However, the potential role of the real estate sector has been constrained by informal markets, lack of formal capital, and fiscal disincentives. In order to encourage formal market to invest in the real estate, the Securities & Exchange Commission of Pakistan issued Real Estate Investment Trust (REIT) regulations in 2008, which were revised in 2015. However, these regulations have not helped in sectoral development. In last seven years, only one REIT scheme has been launched.
The report suggests some policy, regulatory and fiscal measures to facilitate a more effective role of the real estate sector in economic development, employment generation and industrial growth by bringing it in the formal market. Given an estimated 10 million families not having their own housing and using a base figure of two million rupees as an average cost of a residence, the economic activity to cover this shortfall alone could amount to Rs. 20 trillion.
Housing services and construction collectively make 9.2 percent of the GDP as of 2015. Since it is linked with several other industries, the real estate sector has huge implications for economic development in terms of creation of employment and investment. While formal construction is the fourth highest contributor to employment generation, its share in the informal employment is even higher.
A well-functioning real estate market should efficiently allocate land, industrial, commercial and residential complexes and public infrastructure projects between supply and demand. Housing supply should adequately meet the demands of various income strata; businesses should be able to acquire or rent property as reasonable rates and owners and developers should face competitive pressure from other sellers. A competitive real estate market is also very transparent in terms of pricing. Pakistan has witnessed phenomenal growth in the real estate market over last ten years in the form of modern urban infrastructure like sprawling housing schemes, shopping and office plazas and leisure lifestyle. This growth has persisted along with informal nature of most transactions, exorbitant prices and absence of a supportive financial framework.
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