Pakistan’s obsession with real estate presents a curious contradiction: despite almost every household experiencing some form of fraud or financial loss, real estate remains the preferred investment avenue for the majority. From middle-class professionals to business tycoons, nearly everyone has parked their funds in plots or property.
According to national accounts, real estate activities contribute Rs2.32 trillion in gross domestic product (GDP) at constant prices, accounting for roughly 5.8% of the economy. However, these figures only represent the formal side; the informal sector—where a significant chunk of the activity occurs—remains largely unaccounted for due to the lack of reliable data.
While one could attempt to estimate the true size of the informal sector, few indicators capture its scale better than the frequent real estate amnesties successive governments introduce to whiten parked money.
Although the most recent amnesty talks collapsed over International Monetary Fund (IMF) concerns, the 2021 amnesty saw over 2,100 projects taking advantage of the scheme. Similarly, back in 2018, when the incentives weren’t limited to real estate, 14.6% of all declared assets were in property.
As a result, informality dominates most conversations about real estate. Sadly, even the formal sector struggles with overpromising, delayed handovers, and subpar project quality—common complaints among buyers who have little recourse. Their options are either enduring years of fatigue in the courts or accepting substandard outcomes. Most opt for the latter, given that bare minimum delivery has become standard practice.
This situation persists largely because Pakistan’s real estate sector lacks a dedicated regulator. Despite being a major investment channel, there is no authority holding developers accountable, resulting in a vacuum where subpar construction is tolerated and long-term property maintenance is often ignored.
This absence of regulation has normalized a build-and-forget model, where long-term management and infrastructure quality are afterthoughts rather than core priorities.
Even among reputable developers—where the risk of fraud is lower—there is systematic underinvestment in quality infrastructure. Several factors drive this trend:
-
Lack of institutional financing: As of January, the real estate sector had only Rs36.3 billion in outstanding credit, representing less than 1% of its nominal GDP. (This excludes loans for construction or mortgages.)
-
Underdeveloped property management: Unlike developed markets, professional property management is a nascent concept in Pakistan. With price appreciation driven largely by speculation instead of rental yields, developers have little incentive to invest in features that enhance the tenant experience or reduce operational costs.
Since developers make money by selling real estate units—not managing them—their focus is on maximizing square footage. Amenities like parking spaces and green areas often fall by the wayside.
In the case of office developments, projects are mainly funded by high-net-worth individuals seeking rental income or capital gains rather than by end-users. Consequently, features that sell quickly are prioritized over efficiency or sustainability.
Thus, the end product typically delivers only the bare minimum instead of adhering to modern high-rise standards—such as reliable elevators, firefighting systems, properly managed common areas, and building management technology.
Once projects are handed over to multiple individual owners, usually managed by an ill-equipped team, collective accountability collapses. This fragmentation makes meaningful improvements nearly impossible. Developers, having completed their profit cycle, often lose interest in the project altogether.
Ultimately, the cost of neglect is borne by the tenants—typically small businesses—who must fund repairs and upgrades out of pocket. These businesses desire functional, well-maintained workspaces without the burdens of ownership or heavy capital investment.
Interestingly, the co-working industry has stepped in to address these long-standing issues. In less than a decade, players like Colabs, Daftarkhwan, Kickstart, and The Hive have built a combined portfolio of around 40 properties.
Due to the lack of bank financing, each co-working venture had to find creative funding sources, ranging from venture capital and private equity to corporate investors and high-net-worth individuals. Despite different models, one common factor stands out: a commitment to thoughtful design and professional property management.
Property management itself has emerged as a major revenue stream. By transforming dead commercial spaces—such as warehouses—into co-working offices, these companies offer a dual value proposition:
-
For property owners, access to professional management expertise without needing to build capabilities internally.
-
For tenants, consistently high service standards and well-maintained spaces.
Most crucially, this model pulls real estate operations into the formal economy through market incentives rather than relying solely on regulatory enforcement.
The success of co-working spaces offers a roadmap for the wider real estate sector. Rather than waiting for sweeping regulatory reforms or institutional investment, the industry can scale proven management models across a broader array of property types.
As these new standards deliver higher yields and better tenant experiences, they naturally create pressure for better regulation and draw in institutional capital.
The real challenge is scaling beyond niche markets like co-working. This requires support from policymakers—to create frameworks encouraging professional property management—and financial institutions to fund successful models.
The core lesson is clear: formalization of real estate in Pakistan doesn’t have to be top-down. Market-driven solutions that align incentives and improve service delivery can lead the way.
