Foreign Investor Proposes Tax Incentives for Pakistan’s Real Estate Sector

ISLAMABAD: A prominent international investor in the real estate domain has strongly suggested a decade-long tax exemption for Foreign Direct Investment (FDI) within the property sector. The investor also recommended the repatriation of earnings and the establishment of a specialized regulatory body under the Special Investment Facilitation Council (SIFC).

During discussions with a carefully chosen group of journalists on Friday, Tarek Hamdy, the CEO of EIGHTEEN Housing, highlighted the significant obstacles and attractive prospects present in Pakistan’s real estate market. The investor’s primary suggestions centered on reinforcing regulatory structures, drawing in foreign investments, and simplifying administrative procedures to stimulate economic advancement.

Tarek Hamdy emphasized the critical need to appoint technical experts to the suggested regulatory authority for the real estate industry. He lauded the SIFC for its considerable contribution in aiding foreign investors and optimizing investment processes across diverse sectors of Pakistan’s economy.

Reflecting on his experiences, he noted that the creation of the SIFC represented a forward step in alleviating bureaucratic delays, cultivating investor assurance, and nurturing a more business-oriented environment. To further enhance the SIFC’s effectiveness, Hamdy proposed broadening its framework by integrating technocrats, economists, legal professionals, and experienced individuals from various sectors and financial industries to guarantee well-rounded and informed decision-making.

A crucial element of Hamdy’s recommendations focuses on fostering a more appealing and predictable investment landscape for global investors via ambitious and strategic fiscal stimuli. He strongly advocated for a ten-year tax holiday specifically designed for FDI in the real estate sector, an industry he believes possesses immense potential to fuel economic expansion and urban revitalization. Moreover, he emphasized the vital necessity of providing a transparent and reliable mechanism for profit repatriation, signaling to global investors that Pakistan welcomes business under competitive and investor-friendly terms.

The CEO of Eighteen questioned the logic of anticipating international investors to allocate their funds in Pakistan without guarantees of substantial returns or a definite exit plan. He questioned why any foreign investor would invest if they cannot repatriate their profits, emphasizing the basic necessity of Return On Investment (ROI) as a fundamental aspect of global capital flow.

Tarek Hamdy also tackled the pressing matter of excessive taxation in the real estate sector, deeming it a major barrier to growth and investor confidence. He contended that disproportionate and frequently arbitrary taxation has become a manifest burden on the sector, directly impacting sales volumes and deterring both domestic and international investment. He suggested that a more sensible and balanced tax strategy that encourages development rather than stifles it should be implemented.

He criticized the actions of certain revenue authorities, asserting that some institutions have turned to intimidation tactics instead of enabling legitimate projects. He noted that investors and developers often face unexpected raids and pressure without substantial legal justification. He specifically mentioned an instance involving the Federal Board of Revenue (FBR) and the Punjab Revenue Authority (PRA), where EIGHTEEN Housing was targeted. He claimed they raided offices and attempted to undermine credibility but could not substantiate any claims in court.

He portrayed these actions as deeply detrimental to Pakistan’s investment climate. He questioned expecting investment in an environment where regulatory bodies act like bullies instead of facilitators.

Addressing bureaucratic inefficiencies, Hamdy mentioned the challenges posed by conflicting regulations across various government entities involved in approvals. He advocated for a streamlined, single-window operation, empowering bodies like the Board of Investment (BOI) to ease processes and diminish red tape.

Tarek Hamdy conveyed significant worries regarding the unregulated proliferation of unlawful housing societies throughout Pakistan, terming it a grave menace to the credibility and stability of the real estate sector. He emphasized how these unregulated entities function without appropriate approvals or supervision, exploiting regulatory gaps and insufficient enforcement. Consequently, numerous individuals, notably overseas Pakistanis, have become victims of elaborate scams, investing in projects that either do not exist or never materialize.

Hamdy also suggested establishing a centralized digital registry encompassing all housing societies nationwide—a measure he believes is crucial for restoring transparency and investor confidence. This registry should serve as a publicly accessible platform where investors, particularly overseas Pakistanis, can verify the legal standing, No-Objection Certificates (NOCs), development progress, and regulatory endorsements of any housing project prior to committing funds.