It is important to know some significant things before contracting with a real estate developer who will oversee construction projects, in order to ascertain the extent of his ability and experience, to be sure about the future of the project, and to enhance mutual trust between the investor and the developer.
Real estate holds great potential to revitalise and boost Pakistan’s economy. Lack of regulation in the administrative, financial, constructional, and environmental domains seriously affects the growth of the sector. But recent steps, such as the passing of the Real Estate Regulation and Development Bill 2019, provide impetus to future prosperity and development of the industry. Pakistan has also witnessed increased construction activity in the aftermath of the formal declaration of the construction sector as an industry. But there are several key issues with real estate projects in Pakistan such as a lack of proper and complete information, misleading advertisement campaigns, incomplete documentation, cartelization, and false representation of land ownership. While such projects are offered at mesmerizing rates and payment plans, usually, extra money is demanded in the form of development charges in later stages of the project. Therefore, it is essential to know what are the complete obligations upon real estate developers in order to safely engage in realty transactions and investments.
Importance of Real Estate Developer
Where an investor is concerned with investing in land for a limited period for the purpose of buying, selling, and seeking profit without knowing much of the important data, a real estate developer finds new raw land to produce real estate products that meet the real needs of the community, between residential, industrial, or commercial products. The developer is not a contractor or a real estate consultant, he is a development manager who provides the best idea for the project through detailed feasibility studies, funding sources, selection of the best consultant, the most suitable contractor, and the marketing plan and sales strategy. The name “real estate developer” is only for those who provide integrated services in the field of real estate, and those who add value that helps to build the project quickly, while avoiding mistakes in the work, and provide good management and marketing of the property and maintain its value. During the construction phase, the developer will do the work of the manager, who follows the progress of the work according to the time and financial plan of the project, through direct supervision and careful follow-up, and the developer during this stage also follow the changes and problems that occur on the project and solve them by the lowest possible material and temporal costs. It is very important to know some important things such as detailed information about the project, the timeline of the project, the developer’s history of past projects, time of completion, current projects, cost study, alternative plans, penalty clauses, and engineering consultants before starting out to protect from fraud and loss. (Lopez, 2019)
Obligations of Developers
According to the Islamabad real estate regulatory bill 2020, real estate developers have obligations in several areas such as project advertisement, taking advance deposits, entering into agreements of sale, adherence to sanctioned plans, insurance of project, and obligations of a developer in case of transfer of project to any third party. With regards to advertisement, the developer is supposed to advertise accurate details of the project whereby any investor, who faces a loss due to incorrect information advertised, is to be compensated in full by the developer. If an investor intends to withdraw from a proposed project based on missing information in the advertisement, the developer is required to pay back the entire investment along with interest. A developer shall also not accept more than ten percent of the cost of the product advertised as advance payment or application fee. This will also not be done without any written sale agreement, which shall comprehensively mention all the details related to the project and the agreed payment plan. The developer is also obligated by the regulatory authority to adhere to sanctioned plans of the project, and cannot make any alterations in layout plans or specifications of fittings and fixtures without consent from allottees. In case of transfer of project to a third party, the developer is obligated to take consent from two thirds of allottees and written approval from the authority. The developer shall also obtain all insurances as may be notified by the authority. Lastly, the developer is obligated to execute a registered conveyance deed in favour of the allottee with undivided proportionate title to common areas as empowered by the law. All these obligations make sure that the interests of the investor and buyer are safeguarded in the best way possible. (Government of Pakistan, 2020)
Government of Pakistan. (2020). Islamabad Real Estate Regulation Bill .
Lopez, R. (2019). What Are The Importance Of Real Estate Development Or Property Development? Retrieved from https://writeapp.me/ricklopez/note/what-are-the-importance-of-real-estate-development-or-property-development#:~:text=Developers%20are%20mainly%20involved%20in,the%20beginning%20to%20the%20end.