Real Estate Investment: Foreign Investor Proposes Tax Holiday and Regulatory Reforms

ISLAMABAD: A prominent international investor in the real estate sector has strongly advised implementing a decade-long tax exemption for Foreign Direct Investment (FDI) within the industry. They also suggested enabling profit repatriation and establishing a dedicated regulatory body under the Special Investment Facilitation Council (SIFC).

During a discussion with select journalists on Friday, Tarek Hamdy, CEO of EIGHTEEN Housing, addressed the important obstacles and potential benefits present in Pakistan’s real estate market. The foreign investor’s primary recommendations centered on improving regulatory structures, drawing in foreign investment, and simplifying bureaucratic procedures to stimulate economic advancement.

Tarek Hamdy emphasized the immediate requirement of appointing technical specialists to the real estate sector’s regulatory authority. He acknowledged the SIFC’s substantial contributions to assisting foreign investors and improving investment procedures across different sectors of Pakistan’s economy.

Based on his experience, he noted that establishing the SIFC was a beneficial step toward reducing bureaucratic obstacles, fostering investor trust, and cultivating a more welcoming business climate. To enhance the SIFC’s effectiveness, Hamdy proposed expanding its structure to include technocrats, economists, legal professionals, and seasoned experts from diverse sectors and financial industries, ensuring well-rounded and informed decision-making.

A crucial aspect of Hamdy’s proposals is establishing a more appealing and reliable investment environment for global investors through ambitious and strategic fiscal incentives. He passionately supported a ten-year tax break specifically designed for Foreign Direct Investment (FDI) in the real estate sector, an area he believes possesses considerable potential for fostering economic expansion and urban development. Furthermore, he emphasized the crucial need to offer a transparent and reliable mechanism for profit repatriation, signaling to global investors that Pakistan is receptive to business on competitive and investor-friendly terms.

The CEO of Eighteen questioned the logic of expecting international investors to allocate their funds in Pakistan without guarantees of substantial returns or a defined exit plan. He questioned, “Why would a foreign investor invest their money here if they cannot retrieve it with profit?” emphasizing the fundamental importance of Returns On Investment (ROI) as a fundamental element of global capital flow.

Tarek Hamdy also highlighted the significant problem of excessive taxation in the real estate sector, calling it a major impediment to growth and investor confidence. He claimed that excessive and frequently arbitrary taxation has become an evident burden on the industry, directly affecting sales volumes and discouraging both domestic and foreign investment. He stated, “When taxes rise, sales fall. It’s a straightforward equation,” advocating for a more sensible and balanced tax policy that promotes development rather than stifles it.

He criticized the actions of certain revenue agencies, alleging that instead of assisting legitimate projects, some institutions have used intimidation tactics. He highlighted how investors and developers are frequently subjected to unexpected raids and pressure without adequate legal support. He mentioned an instance involving the Federal Board of Revenue (FBR) and the Punjab Revenue Authority (PRA), where EIGHTEEN Housing was targeted by such actions. He stated, “They raided our offices and sought to damage our reputation, but when the matter was brought before the courts, they couldn’t substantiate a single claim.”

He described these actions as not just harassment but as profoundly detrimental to Pakistan’s investment climate. He commented, “You cannot anticipate people to invest in an environment where regulatory agencies act like bullies rather than facilitators.”

Hamdy lamented the difficulties caused by inconsistent regulations and legislation across numerous government agencies involved in various approvals while addressing bureaucratic inefficiencies. He advocated for the implementation of a simplified, single-window operation strategy, allowing organizations such as the Board of Investment (BOI) to enable smoother procedures and eliminate red tape.

Tarek Hamdy expressed serious worries about the uncontrolled proliferation of illegal housing societies across Pakistan, calling it one of the most alarming dangers to the real estate sector’s credibility and stability. He emphasized how these unregulated organizations function without appropriate approvals or monitoring, exploiting legal ambiguities and a lack of coordinated regulatory enforcement. Consequently, many people, particularly overseas Pakistanis, have fallen victim to elaborate frauds, investing their hard-earned money in projects that either do not exist or never materialize.

Hamdy also suggested establishing a centralized digital registry that includes all housing societies in Pakistan, which he believes is crucial to restoring transparency and investor confidence in the real estate sector. He proposed that this registry serve as a publicly accessible platform where investors, particularly overseas Pakistanis, may check the legal status, No-Objection Certificates (NOCs), development progress, and regulatory approvals of any housing project before committing their money.