Foreign Direct Investment (FDI) is the catalyst for the economic development of a country like Pakistan, especially when the economy is going through macro and micro-level challenges like inflation and lack of forex reserves. Pakistan’s real estate sector offers the best opportunities for foreign investment due to the country’s growing population and urbanization.
It’s high time to attract foreign investment, and one of the growing and high-yielding markets to bring in investment is real estate. The government has been actively seeking to attract foreign investment in the real estate sector. It has introduced several policies and incentives to make it more attractive to foreign investors.
Keeping the returns and risks aside, whether a foreigner invests in real estate in Pakistan…. This guide is all you need to earn the best of returns and avoid potential hazards and failures.
Let us figure out whether foreigners can buy property in Pakistan. In Pakistan, the foreign ownership of land and property is governed by the Foreign Exchange Regulation Regulations Act (FEDA) of 1947 and the Pakistan Citizenship Act of 1951. According to the rules and regulations implemented/ designed by the regulatory bodies, only certain foreigners could buy property in Pakistan.
For example, they could buy property in Pakistan if they are part of diplomatic missions, foreign companies, and joint ventures. Otherwise, they are not eligible; only 18% of the ownership of property or land is allowed to foreigners.
There are no restrictions on agricultural land. Many foreigners apply through nominees or relatives, but this is illegal. The government took action against 17677 registered foreign investors in Pakistan in 2013.
Can foreigners Invest in Pakistan Property?
Yes, of course; foreigners can buy or invest in the property of Pakistan but to a specific limit. Due to the security of national interests, certain restrictions and policies apply. Foreigners can search for lucrative investment opportunities in the Real estate market of Pakistan; they need to meet the required standards, receive a no-objection certificate, and do adequate research before investing.
Pakistan can grow its economic development by letting foreigners invest in the property. There are several options for them to invest in. A couple of them are as follows.
- Residential Properties Commercial Properties
- Real Estate Investment Trusts (REITs)
What are the Restrictions on Foreign Ownership of Property in Pakistan
There are particular situations and circumstances under which foreign investors can invest in property in Pakistan. Some of the essential pointers are mentioned below.
- They can own property under exceptional circumstances.
- They can hold off after getting permission from the government.
- They can only buy 300 square meters in any provincial capital.
- They can buy up to two properties in Pakistan.
- Pakistan allows only 2% of the total land area to be owned by foreigners.
- They need permission from the government to purchase or lease land.
- Two provinces like, Sindh and Balochistan do not allow foreigners to buy real estate of any type.
What are the Permits required for Foreign Ownership Property in Pakistan
Some of the essential permits/documents required for foreigners’ ownership are as follows.
- Firstly, they need permission from the government to buy property from the provincial government. This permit is issued to nationals who have diplomatic relations with Pakistan. It costs around $2,000 and should be renewed every six months.
- Approval from the Pakistan Board of Investment
- NOC (No Objection Certificate) from the foreign ministry of the Interior.
- Approval from Foreign Exchange Regulation Act (FERA)
- Proof of funds for the purchase
- A valid passport and Visa
The foreigners buying property in Pakistan benefit the country’s balance of payment, locals and foreigners alike. However, the mentioned permits take a lot of work to obtain. After the purchase permit, the next step is a construction permit from the local municipality. This permit is a basic one for further procedure.
A couple of benefits that investors and the country could avail are following
- High Returns
- Positive Balance of Payment
- Diversification of Portfolio
- Tax Benefits
- Rental Income
- Increase in a country’s income
- Reduced costs
- Employment and economic boost/stimulation
- Development of resources
- Easy International trade
Apart from benefits, the investors need to consider the supposed factors mentioned below.
- Legal Requirements
- Property Title
- Property Location
- Property Value
- Financing Options
- Tax Implication
What is an example of real-life FDI?
The best and most realistic example of an FDI investment in an Asian country is McDonald’s franchises nationwide. These businesses enter foreign economies to strengthen their supply chain without changing their industries.
Other examples are Nestle, Walmart, Facebook, and Starbucks. These are the FDI that have invested in the country over the years.
Particular factors that affect FDI are several; we will discuss a few of them that the investors need to consider before investments proceed.
- Open Economy
- Above-Average Growth
- Environmental Stability
- Skilled and cheap Labour
- Exchange Rate Stability
- Government Support
- Good Infrastructure
Conclusion
Pakistan is among the strategic potential locations, making it one of the most vital national and international hubs economically. Pakistan receives significant FDI from different regions like Asia, Europe, Africa, America, and Australia. There had been almost a 37% rise over the previous year.
Pakistan needs to formulate policies favorable enough for FDI and potential investors to come and invest in the economy.
