Cataloguing the real estate sector – Business

Despite the tough economic conditions prevailing in the country, realtors and development agencies are busy marketing their schemes. It is believed that real estate still dominates in attracting investments from large-scale investors as well as ordinary individuals with some savings.

High risk in other sectors such as trading or manufacturing, absence of advice and information regarding parallel opportunities, aggressive marketing by realtors, and the psychological affinity of people towards property investments are a few reasons.

Given that there is an overall interest in land and property enterprises across the country and beyond, the trend of investment is likely to remain stable in this direction. However, efficiency in the real estate market is constrained due to some basic handicaps.

An element of doubt always lurks behind the validity and veracity of transactions, both for buyers and sellers. Complicated procedures of documentation, the spread of corrupt practices on the web, weak legal safeguards, and, above all, limited access to information are some barriers that adversely affect the performance of the real estate market.

Computerised record-keeping can eliminate deceit, encourage transparency and enhance property tax collection

While the sector is in dire need of comprehensive reform, creating an efficient and scientifically structured real estate information system is the first step in the proposed process of improvement. Let us take the Karachi urban region as an example for a focused review.

In 1990, the Karachi Metropolitan Corporation undertook an urban land management study with the assistance of local and Australian consultants. The objectives were to take stock of land utilisation patterns and available land reserves, identify vacant/unutilised land parcels, and identify future land in the hinterland.

The documentation was aimed to scientifically predict the trends of construction and real estate development. The study also recommended the creation of a centralised database with the aim of serving multiple clients. Unfortunately, not much was done afterwards. Donor agencies attempted to streamline this sector through various projects during the 1990s, but not much could be achieved in the end.

In 2003, an attempt was made to computerise the records of registered properties by the Excise and Taxation Department of the Sindh Government. The initiative had an active start but could not continue at the desirable pace to complete the assignment of even the properties in the planned settlements. Donor agencies such as the World Bank continued to emphasise upgrading the database to harness the potential of collecting more revenue under property tax, but little has been achieved.

Whereas individual land management agencies do possess records of ownership and other variables, they are reluctant to share them for fear of losing control over them. At times, some of these agencies fall prey to clandestine pressure, which results in non-transparent transactions.

The unplanned conversion of single-unit residences into multistoried buildings is a common sight all across the city. Regulatory agencies have not addressed this challenge in an appropriate manner. Similarly, powerful venture capitalists have acquired large swathes of peri-urban land in the Gadap area and other locations in Karachi for the same purpose.

It is common knowledge that the real estate sector has many overt and covert stakeholders, and the status quo suits the interests of some of them. However, the prerequisites of good governance demand that an effective legal and administrative framework be promulgated without delay.

This move will help stem the clandestine muscle men and manipulators and create a level playing field for all, especially the weaker proletariat in the society. It will also help in the rationalisation of choices by all the interest groups for self benefits. In other words, a mechanism of transparency shall evolve by itself in a gradual manner.

The subsequent step is to collect, examine and verify land ownership records — an extremely complex task. Multiple formats and procedures of ownership; willful tempering, concealing and destruction of some records; poor record keeping and rampant corruption are handicaps that continue to affect the sector. However, the only way to begin the exercise is to launch this initiative after consultation with all the institutional stakeholders for cooperation and assistance in this effort.

The more crucial phase arises at the stage of development-based information on land. This stage pertains to the variables such as development permissions, amortisation of land uses, disputes, violations, penalties, conversions, regularisations and related information. Experiences have shown that this information cannot be collected without well-organised field surveys by teams of competent professionals.

The records available with building control authorities and related departments are also important to be scrutinised and made available for public access. Public agencies and departments, some of which are owners and managers of large tracts of high-value land assets, need to be advised to prepare and publish authenticated versions of their land holdings.

A sound and user-friendly information system in real estate is essential to help the common people make choices and transactions for properties. This initiative will also significantly enhance the collection of property tax to a level where these funds could be used for the repair and maintenance of the city’s run-down infrastructure.

The writer is an academic and researcher based in Karachi

Published in Dawn, The Business and Finance Weekly, October 7th, 2024