Understanding the Islamabad RERA Act: Registration of Real Estate Agents

Posted by: IIPS Category: Real estate Comments: 0


A lack of planning and regulation in the real estate sector has led to increasing malpractices in the real estate market. Considering these conditions, the Islamabad Real Estate Regulatory Act (2020) proposes several measures to regulate and standardise real estate practices across the country. Although the act remains focused on the Federal Capital, it can also be adopted by each province according to their needs.

Among the many issues that the Act focuses on, the registration of real estate agents and developers with a central regulatory authority is of high importance. Pakistan has very little to no regulation regarding how real estate agents conduct business. A recent step taken by the Federal Board of Revenue, whereby agents are to register themselves as Designated Non-Financial Businesses and Professions is a welcome step towards regulating money laundering and terrorism financing through the sector. However, the normal consumer is faced by multiple other challenges that mar investor confidence in the Pakistani market.

Continue reading to understand the impact of recently proposed regulations in the Real Estate sector.

Regulatory Landscape for Real Estate Agents

Real estate developers and agents largely remain unregulated in Pakistan. Due to this, many malpractices have surfaced over the years that directly impact the consumer and investor. To highlight some of these challenges, we will look at a few examples from the market practices being followed.

1.      Unregulated Development Projects

A recent uptick in the number of real estate development projects in Pakistan point towards the increasing investor interest in the Pakistani market. However, there are genuine concerns regarding the practices being followed by real estate developers who wish to profit from this scenario.

Housing schemes and high-rise buildings require multiple approvals from regulatory authorities before work can be started on ground. However, these approval documents require a long time to obtain, and most developers continue their development activities without obtaining all the necessary approvals.

The practice is a direct cause of fraud with investors and most projects are left at a standstill for many years. It can be argued that long processes are the main hurdle in starting approved projects, however, this cannot be an excuse to infuse hard earned money from investors in a project whose future is uncertain.

2.      False Advertising

A secondary impact of a lack of regulation is the false advertisement of investment opportunities in the market for local and overseas investors. As the real estate market is considered a safe tax haven in Pakistan, most developers and agents lure people into making investments that are not reflective of the on-ground realities.

There have been instances in the market where a developer has sold a greater amount of land than what was available. The people who invest in these projects are misled by false advertisements that manipulate the genuine interest of buyers and investors in the market.

It must be highlighted here that not only does it ruin investor confidence in the Pakistani market, but it also tarnishes the reputation of those working in the real estate sector. Hence the need for regulation in this regard is dire.

3.      Lack of Professionalism

Although the real estate sector is a large part of Pakistan’s economy, there are very few formal education options for young professionals to pursue. This creates a lack of professional practices in the market as most of the people currently engaged in the business do not even hold bachelor’s degrees.

Considering that Pakistan wants to attract foreign investment in the sector, a lack of trained and skilled professionals tarnish the outlook of the overall stakeholders involved. Professionals from other fields expect a similar level of communication as they have experienced in other industries. They also expect real estate advisors to provide them with professional services in contracts and market analysis.

The main reason why so many unskilled individuals have entered the Pakistani real estate market is the lack of regulation regarding who can practice as a real estate advisor.

4.      Standardisation of Best Practices

Consumers and investors in the real estate market of Pakistan often report different experiences while engaging with real estate agents and developers. A lack of standardized practices across the industry is the main reason for this challenge.

Although it cannot be guaranteed that every person receive a similar level of service, however, a codified manual of conduct can regularise the market and allow for more ethical practices in the sector.

What are the Proposed Measures in RERA Act (policy measures)

To address the lack of regulation in the real estate sector, the National Assembly of Pakistan passed the Islamabad Real Estate Regulatory Authority Act. The aim is to introduce effective regulation and promotion of the real estate sector at all levels. The current bill has been restricted to the Islamabad administration, but the government aims to extend the scope of the bill to all provinces of the country. The bill aims to regulate several areas of the real estate sector including real estate agents.

According to the act, real estate agents are not allowed to facilitate sale or purchase of any plot, apartment, or building in a real estate project without obtaining formal registration under the regulatory authority. Agents are also barred from acting on behalf of anyone in this regard. Every real estate agent is stipulated to make an application to the authority for registration. Subsequently, the registration will be valid for a period of 2 years with the option to renew after every tenure ending. The act also stipulates that no application is to be rejected unless the applicant has been given an opportunity to be heard in that matter.

Agents registered under the authority will be granted a registration number which shall be quoted in every real estate sale or purchase facilitated by that agent. If an agent is found in breach of the terms and conditions specified under the act, a formal complaint can be registered against the agent and the authority may revoke or suspend his license for a period they seem fit. Besides this, there are several functions of a real estate agent that are defined under the act which shall remain the subject of a separate discourse.

In simple words, real estate agents are required to register themselves with the regulatory authority or they will not be eligible to sell any property whatsoever.

A Critical Analysis

The real estate sector of Pakistan has obtained a divided reputation over time, primarily due to a lack of regulation in most areas of the sector. A fragmented regulatory framework has been used by the government in regulating some areas of this vital sector. However, no overarching authority regulatory authority exists at present.

One of the recent developments was the policy that made it mandatory for real estate agents and developers to register themselves as DNFBPs with the Federal Board of Revenue (FBR). The policy was introduced in the wake of FATF’s recommendation to monitor economic activities in the real estate sector. However, this recent attempt at regulating agents has loopholes as it does not cover the entire breadth of real estate activities, leaving room for manipulation.

Historically, the real estate sector and its key players have been largely unregulated since independence. The patwari system was opaque and conflicting metrics of assessment worsened problems for local real estate investors. The regressive methods used to regulate the real estate and land development sector are simply non-applicable for the modern and dynamic needs. This makes the case for a real estate regulatory authority (RERA) more relevant and important.

Globally, real estate regulatory authorities exist as federal or state institutions. These institutions help the governments derive a major source of their revenue from the land and property sector. Effective regulation of this vital area has enabled countries like China to become economic superpowers.

Similarly, neighbouring country India has been relatively quick to implement its Real Estate Regulatory Authority (RERA) in several states. In India, the RERA requires the agents to register themselves with the authority to facilitate the real estate transaction process. There are almost 500000-900000 real estate brokers and agents in India. RERA has managed to create accountability in the industry paving way for professional and transparent businesses.

Agents are obliged to disclose all the appropriate information to the customer and are supposed to help the customer choose a RERA compliant developer. In addition, agents and brokers cannot promise any amenities or services not reflected in the documents. Besides this, the act makes them liable to provide all information and the necessary documentation to the home buyers at the time of booking.

Another underestimated aspect of RERA for the real estate agents is its ability to filter out inexperienced and unprofessional brokers and agents that have turned to the real estate sector to extract financial gains through dubious means.

The debatable practices of real estate agents and brokers have created a bad reputation for the real estate sector in Pakistan. Executing the regulatory functions of the real estate regulatory authority can help in regulating the agents in a way that it can reduce inexperienced and dubious players and incentivize educated and professional players in the sector.

Way Forward

The introduction of the RERA act is a positive step towards regulating individuals that are key in creating accountability and transparency in real estate transactions. Under the existing Islamabad Real Estate Regulatory Authority Act, there is no mechanism highlighted than can integrate and promote education and awareness regarding appropriate regulatory practices. However, the act can be amended to include clauses for mandatory real estate education to ensure professionalism and standardization in the market. It is also recommended that a similar regulatory authority be established in all the other provinces of Pakistan by including all stakeholders in the process.


The real estate sector of Pakistan is one of the largest stores of national wealth, however, despite this, the sector up till now had no conclusive and comprehensive regulatory framework that could govern it. Recently, the Islamabad Real Estate Regulatory Authority (Act) was introduced to regulate this vital sector. The authority created under the act will be responsible for governing the real estate agents and their activities to increase transparency and accountability. A similar approach to regulating the real estate sector was taken in India which was successful in regulating, mainstreaming, and monitoring most of the country’s real estate agents and brokers.

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IMARAT Institute of Policy Studies

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