A Noob’s Guide to Buying Property in Pakistan
Buying a property can sometimes become an uphill task, especially when you have never been to the realm of real estate in Pakistan. When you enter the market with money in your pocket, everything looks rosy and appealing. Property dealers will make you believe that you are a step away from earning millions by investing in their projects. This may be true in rare instances, but there are high chances that you end up getting your money stuck in a dead or shady project.
Real Estate is one of the largest sectors in Pakistan with trillions of rupees of investments, but it has never been duly regulated by the Government. Weakness of regulatory systems and unavailability of authentic information gives room to malpractices, therefore one should spend some time doing a thorough research through all available means before entering into any transaction.
There are numerous examples of property scams in Pakistan, even in cities like Lahore, Karachi and Islamabad. Some of the examples of such scams include selling duplicate files, selling encroached land, selling illegal society or project, selling fake registration forms, and selling files without actual land etc.
If you have been following the supreme court cases recently, you might have been surprised to know that many big private companies and even Government authorities were found involved in illegal practices.
In case of Government projects, the only risk involved is Time, so your only loss is the opportunity cost. Whereas, in case of private projects, you may end up losing your money unless you are fortunate enough to take your case to the court and win a favorable decision.
Real estate investments can be good or bad. A good property can earn you a fortune, while a bad one may get stuck for years without any gain, or you may have to bear some loss to get rid of it. This all depends on your homework, future projections, and sometimes external factors like unfavorable decisions by the Government or the Court, or delays in mega development projects.
As an investor, you cannot always make good decisions , but you can minimize the risk of loss by doing your proper homework before a final decision. If your close friends or relatives are involved in real estate investments, you should seek their advice before you enter the market.
Our purpose of writing this article is to educate the new entrants in real estate market of Pakistan as to what are the key points to consider before buying a property. We will discuss what important aspects of a project or housing scheme must be known before you consider it for investment.
Suppose you are looking to invest in a residential plot, and somebody has told you a housing scheme which falls in your budget. First of all, check from your close friends and relatives if they can guide you regarding that option. If they are not involved in real estate, or you want to keep your investment a secret, then just make a check list of points we are listing down below, and do your homework before you finalize.
Know the Sponsor
This is the first thing you need to know. A sponsor is the actual person or company behind a project. Unlike institutions such as DHA, or cooperatives like MPCHS, private projects are owned by individuals.
Any housing project owned by the Government or armed forces is considered safe, whereas projects by cooperative societies or private individuals can be as good as bahria town and mpchs or as bad as Muhafiz Gardens Cooperative Society and Jeddah Town.
Do a research on the sponsor. Check his reputation in the real estate market or in other business sectors in case his achievements are in another industry. If he has bad reputation, put the project in a black list, if he has good reputation, put the project in a white list, and if the sponsor is anonymous, put this project in your grey list until you go through other points in your check list.
Know the Project
After you have known the sponsor, and found out about his reputation in the market, check the following information from the sponsor:
- Total land area of the society
- LOP from relevant development authority
- NOC from relevant development authority
Whatever information you receive from the sponsor, just go and cross check from relevant development authority like KDA, RDA, LDA, CDA etc. If the project is approved, and has its NOC issued by the relevant authority, put the project in your white list, if approvals are under process, put it in your grey list, and if it is illegal, put it in a black list.
Know the Location
Normally, location is the first thing which is considered for making an investment, but it is better to know the background first in order to avoid any trap. Make a visit to the society and check the access roads. If the society lies in the suburbs of a city, direct approach should be very important. Check the contours of the land, and additional features of that location. Consider any upcoming mega project or development in that area by the Government or any private group. If location and surroundings are good, put it in your white list, otherwise put in a black list.
Know the Master Plan
After you have visited the location, and you are convinced that the location is going to be fruitful in future, it is now time to know the master plan. Check the town planning, and project features. If the town planning is as per modern principles, put it in your white list, otherwise put in your grey list.
Know the Developer
If the sponsor is a reputable individual or company, there are high chances that its developer will also be good. Still, it is important that you find out about the developer. If the developer is reputable and it has developed other projects, you should go and check the development standards. If standards are good, put it in your white list, otherwise put it in your grey list.
If all of the points above are in your white list, that is the best opportunity for investment. If first three points are in your white list, and last two points are in your grey list, you may still go for purchase. If second point is grey, i.e. the project is under process for approval, you should check the application documents from the developer, and also verify from the development authority. If things seem okay, you can go for the purchase. If any point falls in black list, then you have to be careful and it will be better to avoid that option.
If you cannot visit the locations personally for research, you can simply find out relevant information from official websites of development authorities. You can check location on Google maps, development standards from society pictures, approval status from development authority’s helpline, town planning by approved map of the society, and sponsor information from relevant dealers and internet.
After you have gathered all necessary information, you can simply visit the area once to check if your information is correct, and then proceed with purchase.
When you are going to purchase a property, you should do it yourself. If you are unable to visit yourself, you can authorize your close relatives to do everything on your behalf. We are sharing some important steps below which might help you avoid getting conned or fleeced by property dealers.
Find a Trustworthy Dealer
It is the most important step before you enter into any property buying transaction. You cannot trust everybody who is sitting in the market. Try to find out the known and authorized dealers who have been working in the market for many years. Once you start your research, you will find out many agents. Don’t get flattered by cunning agents, or get impressed by big offices. Look for genuine professionals who sound honest and reasonable. Once you have found a reasonable agency, proceed with your property requirement.
Check the Location of Plot
Don’t trust the map, go check the location of plot on ground. If it is non-developed, use Google map to get precise idea of location. Avoid rocks or deep plots. Try your best to choose level plots. If area is on the hill, choose top locations with better view.
Check Market Prices
If your dealer has given you a plot option with some price demand, try to check other options in the market. Do not call every agent, it will create buzz in the market and you may end up losing your best options. You should simply try one or two more agents, and use online portals to check plot prices near your plot.
Check Documents
Now that you have chosen a plot and you agree on price, you should ask for a copy of plot documents for verification before paying byana/token. After you verify from society office, you can go ahead with confirmation payment.
Meet the Owner
It is better to ask your agent to arrange a meeting with the seller. If you feel that your agent is trying to avoid the meeting, it is better to stay away from the deal. If the owner is out of country, you can ask your agent to let you talk to him before you finalize the deal.
Pay Byana Not Full Amount
You have to pay 5% to 10% byana/token money in order to finalize a deal. You do not pay full amount at the time of byana. You should pay byana in the form of check or pay order, and try to avoid cash as much as possible.
Ink an Agreement
It is better to ink an agreement at the time of byana, and all terms should be written down and signed by both parties. It is important to discuss with your dealer about the commission, transfer and tax expenses, so that you can arrange the amount accordingly.
Use Pay Orders
It is important that you make your transaction in the form of pay orders or crossed checks. Cash payments have no official record, so it is always safe to pay via check, pay orders or bank transfers. Make sure that all transfer processes have been completed before you hand over the pay order to the plot owner. Make a photocopy of pay order and get it signed from plot owner to confirm receipt.
Demand a Copy of Sale Agreement
Demand a copy of sale agreement at the time of transfer. It may not be useful for you, but it is good to keep a record of every document. Sale agreement will show the amount you have paid for the plot, and check number/pay order number or cash amount (if any) will be mentioned on the agreement along with plot details.
We have tried our best to cover all the important points which you must check before entering into any property transaction in Pakistan. If you spend some time gathering information before investing your hard earned income, you are more likely to avoid illegal or fake projects.
If you have questions in your mind which need answers, feel free to speak your mind in the comments box below. Alternatively, you can email your queries at marketing@manahilestate.com, so that we can assist to the best of our knowledge.
