Realty sector seeks tax break, regulatory body

Investors in the real estate sector have urged the government to give a 10-year tax exemption, permission for profit repatriation and set up a regulatory authority to attract more investment.

They have also called for the inclusion of technocrats in the Special Investment Facilitation Council (SIFC) to unlock investment and ensure transparency.

In an exclusive session with a select group of journalists, EIGHTEEN Housing CEO Tarek Hamdy underscored the pressing challenges and promising opportunities within Pakistan's real estate sector.

He emphasised the urgent need for establishing a dedicated regulatory authority for the real estate sector under the umbrella of SIFC. He also commended SIFC for the significant role it had already played in supporting foreign investors and streamlining investment-related processes in various sectors of Pakistan's economy.

He proposed the expansion of its structure by incorporating technocrats, economists, legal experts and seasoned professionals from different sectors to ensure balanced and informed decision-making.

He advocated for a 10-year tax exemption, specifically tailoured for foreign direct investment (FDI) in the real estate sector – an industry he believes holds an untapped potential to drive economic growth and urban transformation.

Additionally, he stressed the critical importance of offering a clear and guaranteed mechanism for the repatriation of profits, which would signal global investors that Pakistan was open for business on competitive and investor-friendly terms.

He questioned the rationale behind expecting international investors to park their capital in Pakistan without assurances of meaningful returns or a clear exit strategy.

"Why would a foreign investor bring their money here, if they can't take it back with profit?" he posed a question, while highlighting the return on investment as a cornerstone of global capital movement.

He also raised the issue of "over-taxation" in the real estate sector, calling it a major impediment to growth and investor confidence. He argued that excessive and often arbitrary taxation had become a clear burden on the industry, directly impacting sales and discouraging both local and foreign investment.

"When taxes go up, sales go down. It's a simple equation," he stated, advocating for a more rational and balanced tax policy that could encourage development rather than stifling it.

He didn't hold back from criticising certain revenue authorities, alleging that instead of facilitating legitimate projects, some institutions resorted to intimidation tactics. He pointed out how investors and developers were often subjected to sudden raids and pressure without substantial legal backing.

He described such actions not only as harassment, but also deeply damaging to the investment climate in Pakistan. "You can't expect people to invest in an environment where regulatory bodies behave like bullies instead of facilitators," he remarked.

Talking about bureaucratic inefficiencies, he lamented the challenges posed by the conflicting laws and regulations across various government bodies involved in different approval processes. He called for a streamlined, one-window approach by empowering bodies like the Board of Investment to facilitate smoother processes and reduce red tape.

He voiced serious concern about the unchecked mushroom growth of illegal housing societies, calling it one of the most alarming threats to the credibility and stability of the real estate sector.

Hamdy highlighted how those unregulated entities operated without proper approvals or oversight and exploited legal loopholes and the lack of coordinated regulatory enforcement. As a result, countless individuals, particularly overseas Pakistanis, have fallen victim to different scams as they invested their hard-earned money in projects that either did not exist or never materialised.

He recommended the creation of a centralised digital registry, encompassing all housing societies across Pakistan – a move he believes is critical to restoring transparency and investor confidence.

This registry, he suggested, should serve as a publicly accessible platform where investors, particularly overseas Pakistanis, could verify the legal status, no-objection certificates (NOCs), development progress and regulatory approvals for any housing project before committing investment.