Development properties such as residential, retail, construction and commercial rental space are top investment destinations for most Pakistanis across all asset classes. It is considered an attractive investment that offers passive income, great returns, tax benefits and wealth building opportunities.
However, like any other type of investment, investing in development property can involve risk and the property owner could lose their hard-earned money or their investment could be depreciated. I have. There are risks inherent in the nature of real estate or the real estate business. loss potential, the probability that an investor will not receive the expected rate of return, and the variance or volatility of returns from expectations.
Such risks are always greatest during the initial stages of land procurement, regulatory approvals and construction, and decrease as planning is completed. Therefore, early investors have the opportunity to get the maximum return.
However, in Pakistan, property investors also face additional risks related to the prevalence of fraud and fraud in this business. You, or someone in your social circle, may have purchased the property only to later discover that the project in which you invested your hard-earned money was illegal.
You, or someone in your social circle, may have bought a property and later discovered it was illegal, but real estate technology is making the industry more transparent
The developer may not have acquired the land or may have oversold it. or may not have obtained regulatory approvals or other permits for structural and architectural design. In the worst-case scenario, the project could simply turn out to be a Ponzi scheme.
Pakistan’s property market is riddled with fraud, causing millions of unsuspecting homeowners to lose their savings and dreams of owning a home.
A scheme launched by Eden Housing & Developers in Lahore is a classic example of such scams being carried out. A well-connected and powerful development with nearly 12,000 low- and middle-income families said to have siphoned stolen money out of the country over the years while affected investors await justice. I lost everything by someone.
Recently, 43 families who own apartments in Karachi’s Nasla Tower found themselves homeless after a Supreme Court order ordered a high-rise to be demolished for road encroachment.
The inherent risks associated with developing a real estate business, and the increased likelihood of fraud with investors, is that developers, marketing firms, agents, brokers, etc., are typically responsible for determining whether the land was purchased or not, and that developers are all because we hold information about the project, such as whether it has received regulatory approval for How the project is progressing, whether the construction schedule is adhered to by the buyer.
There is a significant lack of transparency when assessing the actual cost of a project due to misleading sales figures, invisible development progress, and large profits sought by developers, intermediaries, etc. increase. Such information is essential for investors to reduce investment risk and avoid fraud by making informed decisions.
Market uncertainty prevents predicting when projects will be completed, stabilized, and return on investment will begin to return. Scams scare the average investor out of the market.
Real estate businesses in Pakistan have always been a go-to investment, estimated by some to be worth over $3.5 billion. With a housing shortage estimated at 10 million by the World Bank and Pakistan’s credit rating, he could lead the country’s economy. About 35 million units of Agency (Pakula) based on current and projected population.
According to Pacra, the sector will account for around 5.4% of GDP in 2021, highlighting huge demand for real estate investment, but with high barriers to entry, low liquidity and cumbersome ownership transfer processes. , is opaque, making it difficult for many to invest. that.
The untapped economic and tax potential of this business is difficult to realize without the digitization of real estate and the mitigation of investment risk and fraud by bringing transparency to the project. The advent of proptech offers a solution to these problems.
“Traditionally, the real estate sector drives the business activity of more than 70 other industries. ,” said Jawad Nayyar, Chief Vision Officer of DAO PropTech. Make it easier for developers, builders, investors and homeowners.
So how can proptech help mitigate the business risks and prevent fraud inherent in investing in real estate developments?
“PropTechs eradicates existing inherent problems resulting from opaque practices and information asymmetries in the real estate sector. Get a transparent view of your costs, our scientific pricing means you won’t have to pay unfair premiums.
“Using a distributed ledger for record keeping protects against price fixing, overselling, data breaches, or fraud. Additionally, all buyers are kept informed of the pace of development and hold developers accountable. We have,” argues Nayyar.
“We are working to eliminate uncertainty and ensure transparency for all projects listed on our digital platform. Giving investors the power to make calculated investment decisions is a unique proposition. is,” he says.
“To date, we have participated in real estate projects valued at Rs 200 crore across a range of real estate asset classes. We have disrupted the country’s developing real estate value chain through full transparency of progress, regulatory approvals and online sharing of all legal documents.
“The use of technology in this business will transform the value generated from real estate from ‘few’ to ‘many.’ Inclusive, transparent and asset-backed growth will ultimately benefit the country.” of economic growth.”
Published November 14, 2022 in The Business and Finance Weekly, Dawn