Digitising Real Estate Rental Services in Pakistan

 
 
 
Digitising Real Estate Rental Services in Pakistan

Rental Agreements

The leasing or tenancy contract explains the contractual binding between a property owner and a tenant and allows the tenant to live in the property owned by another person for a fixed period. The duration of a property’s lease can be renewed with a mutual agreement under this contract along with changes in other aspects of the rental agreement. The leasing agreement must contain the following clauses of ‘Transfer Property Act 1882,’ i.e., transfer of right to make use of the immovable property; the time period of this right to property usage must be fixed; the terms must be explicitly explained; the transferee must acknowledge the transfer, and it must be written either if it is premium or rent or both. Moreover, the law stipulates that rent will be increased by 10% every year or 25% after three years, or parties have the right to make their own agreement for increasing rent.

Home Renting in Pakistan and Digitisation

In Pakistan, the average expenditure of households on renting a house is increasing annually.  As per the Household Integrated Economic Survey (HIES), the average household in Pakistan was spending Rs 888 in 2001-02, Rs 2,693 in 2010-11, and it increased to Rs 7623 in 2018-19 on renting a house per month. Moreover, in 2022 the house renting price jacked up to 6.13% from 4.77% in 2021, which shows that the demand for rental homes is increasing annually.

Digitising the rental services would enhance the sense of security and safety and reduce rent-seekers profit. Moreover, it also reduces the time cost for both tenants and landlords. Different countries are introducing digital rental services, such as Dubai, USA, India, Germany etc. Digital contracts have been introduced in Germany, and recently largest housing company has launched a digital lease sign feature.

Governance is a major hurdle in the real estate sector. The property dealing companies are working offline and have to deal with piles of paperwork and in-person meetings. Getting a suitable and affordable house for rent becomes a challenge for the migrants and daily wagers. On the other side, property owners cannot find decent tenants due to communication drawbacks and data privacy concerns.

However, digitisation helps address legal issues and foster opportunities for the real estate sector. The end-to-end digital process would quickly solve customers’ queries and select suitable tenants by vetting their backgrounds. The following sections of the blog will address what kind of digital rental services can be provided in Pakistan, the benefits and the way forward.

Digital rental services in Pakistan

Digital Rental Service Can Be Provided in Pakistan

The government can provide various digital rental services to increase transparency in the market, such as:

 1. Online Tenancy Contract

The availability of online tenancy contracts through government websites or mobile apps. It will resolve common rental disputes and protect the parties from fraud. The government portals can facilitate the new agreement and renewal of contracts. The form can be filled out by the property management company, the tenant themself or by visiting the government office in person. The tenant can fill the form online by using an app such as the REST app launched by the Dubai public sector. The form will contain information about the tenant, owner, property, and contract (which explains the contract period, contract value, annual rent and mode of payment). For the agreement’s renewal, the tenant should fill out the form and submit the required documents in person or online.

online tenancy contract form

2. Cancellation of Tenancy Contract

When the tenant vacates the property, the landlord or external property management company must cancel the contract. The property can then be advertised, and a new tenancy contract can be issued. This also protects new potential tenants from any litigations in the future or competing claims on a home. In Dubai, tenancy contracts can be cancelled by tenants or property management services. Whereas tenancy contract cancellation is solely the tenant’s responsibility as landlords are not proactive, which delays the process of leasing out property again. In Dubai, the application has no service charges, the tenants have to pay 40 AED when they tenant applied through Real Estate Services Trustee Centres. Property owners get services from the property management company to complete the process timely in line with the rule and regulations.

Cancellation of contract

3. Valuation of Property Lease

This online service facilitates the owner to get the correct valuation of their property. This service can be availed by the tenants, owners, or property management companies by submitting photos and drawing municipality designs. Property valuation can be analysed based on investment methods and comparable methods. The investment method can be used for complex property structures, whereas the comparable is a more commonly used method. The tenant can get a fair deal by comparing different properties and the rate of their area, analysing RERA rental price index, which shows the minimum and maximum achievable price, and negotiating with the owner.

Valuation of lease agreement

Benefits of Digitising Rental Services

The digitisation of rental services can be a good solution to some of the real estate sector problems. It was found that Millennials and Gen Z prefer to rent a home than buy one. They are preferring more to use mobile apps for shopping, connecting with friends, ordering food, etc. There are several benefits of digitising the real estate sector, which are:

1. Online Form Submission

The digital rental services would allow tenants to fill out the form online. It saves time because tenants and landlords do not have to arrange a meeting and sign the application. The online submission of forms and documents is more accessible than the in-person. It also has the option of screening the tenant, which reduces the danger of theft. Moreover, digital form submission helps tenants and landlords get rid of piles of paperwork.

2. Collecting Rent Online

It is one of the most significant features of collecting rent online via an app as it allows to set up an automatic transfer of rents. The tenant will pay the rent timely, and the money transfer process is faster than payment through checks.

 3. List of Vacant Property

The online rental services have a list of vacant properties and reduce the time wasted on manual searches. It provided various benefits such as giving plenty of options, online booking, instant cash transfer etc.

4. Digitally Signing of Documents

A document’s digital signature is legal and has the same worth as a paper copy with an ink signature. Moreover, e-signature saves time and money and is more convenient. If the whole process of getting a rental property can be done online, then the tenant would get the online copy of each document, and they can save it for a lifetime.

Way Forward

The digital transformation around the world has changed the idea that not all prosperous countries need brick-and-mortar structures to thrive. The PropTech and Real Tech companies significantly and positively impact the real estate sector development. The digitising rental service could help to manage residential and commercial assets more effectively, increase transparency and security and save time for tenants and landlords. Moreover, technology gives insight to tenants about the space of the property and helps evaluate property valuation and purchasing opportunities. As per the research, 50% of the broker has said that digitisation has the potential to accelerate the sector’s growth. Private and public partnerships can revamp the rental industry in Pakistan. The private sector of Pakistan can innovate rental services to meet the technological requirements of tenants, which in turn increases the real estate value.

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IMARAT Institute of Policy Studies

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