Pakistan has experienced an increase in its foreign remittances following the announcement of Roshan Digital Accounts (RDAs). The accounts allow non-resident Pakistanis to invest in stocks, equities, and real estate with lucrative profit rates. This blog presents how foreign remittances can be used for boosting the real estate sector of Pakistan. The blog also explains how real estate can be the most lucrative investment option for the government with the two-pronged benefit of high profits and streamlined future growth.
What is the potential of real estate for the future growth of Pakistan?
How is Pakistan bringing in foreign remittance?
Is real estate the best avenue to make investments with foreign remittances?
Pakistan has a large and diverse overseas diaspora who are willing to invest in Pakistan. Realising the massive potential of this resource, the Government of Pakistan recently launched the Roshan Digital Accounts (RDAs) in order to attract greater foreign remittances through legal channels, and use that money to invest in different projects. The new digital accounts are hassle-free and do not require the physical presence of the account holder and can be opened in different currencies as per the State Bank regulations. The Naya Pakistan certificates offered under the Roshan Digital Accounts offer lucrative investment options with interest rates between 9.5 percent for US dollars based certificate to 11 percent for Pakistani rupee based certificate. These are higher than all the other investment options currently present in Pakistan, and it remains to be seen how the Government aims to achieve these targets. A viable policy option can be to invest in the real estate sector as it is the only sector which holds the key to a country’s long-term economic business growth. Therefore, foreign remittances can boost sustainable growth in the real estate sector.
Real Estate for Growth
Considered as one of the most vital industrial segments of any country, real estate is the single most important factor for Pakistan’s future economic business cycle and long-term growth. Real estate can be defined as land with any permanent improvements attached, whether man-made or natural (Investopedia, 2021). Real estate can also act as an indicator for the economic viability and sustainability of an economy. Generally, the level of infrastructural development says a lot about the economic status of a country. Real estate consists of five main categories namely, residential, commercial, industrial, raw land, and special use. Similarly, the real estate industry can also be divided into different segments, such as development, sales and marketing, brokerage, property management, lending, and professional services related to law and accounting. The real estate industry provides enormous employment opportunities to skilled and unskilled labour along with stimulus to allied industries and the economy as a whole.
As a commodity, the value of land or property appreciates with time. With an unstable currency, volatile stock market, and lower return rates on investments, real estate remains a safe investment option for citizens and expatriates. Recent technological developments in PropTech and AI-based start-ups have also boosted the growth of the sector. Although the Government recently announced a Rs 100 billion package for the construction industry to keep the country afloat amid the coronavirus pandemic, public-private partnerships are required to take the industry to its true potential. The government alone cannot incentivise and subsidise the entire sector. The recent inflow of foreign remittance improves investor confidence in Pakistan’s real estate market and holds the potential to uplift the real estate industry.
Foreign Remittance and Naya Pakistan Certificates
Every year, Pakistani expatriates send around $4.6 billion in remittances from the UAE alone through formal and informal channels (Samaa, 2020). Pakistan has faced multiple challenges in bringing foreign remittances in the country through proper and legal channels. Black markets for money exchange greatly reduced the amount of foreign remittance sent by overseas Pakistanis. In an attempt to regularise the process, the State Bank of Pakistan launched a new initiative in collaboration with commercial banks in Pakistan. The new initiative, Roshan Digital Accounts, provides innovative banking solutions for millions of non-resident Pakistanis seeking investment opportunities in Pakistan. The account can be opened remotely through an entirely digital and online process, integrating Pakistani diaspora fully into the Pakistani banking and digital payment system. This means that they will have access to all conventional account services, including funds transfer, bill payments, and e-commerce related payments. There will also be an option to invest in saving instruments such as the Naya Pakistan certificates. These instruments will be launched in both US dollars and Pakistani rupees at short- and long-term tenors. There will also be an option to invest in stocks and fixed deposit products offered through banks. Perhaps the most significant feature is the ability of overseas Pakistanis to undertake residential and commercial real estate-related transactions in Pakistan. (State Bank of Pakistan, 2020) (Pakistan Embassy, 2020)
How can Pakistan most Effectively Utilise the Potential
According to the Governor of State Bank of Pakistan, Dr Reza Baqir, there has been an overwhelming response to the Roshan Digital Accounts from Pakistani expats. Daily deposits are now amounting to a staggering $4 million a day (The News, 2020). The country’s net foreign exchange reserves have also increased by $8 billion since June 2019. This has greatly helped improve Pakistan’s economy and has helped solve the current account deficit problem. To date, total inward remittances into RDA have reached $139.4 million, with $81 million invested in Naya Pakistan Certificates (NPCs) (Dawn, 2020). The Naya Pakistan certificates offer a significant return on investment ranging from 7 percent on US dollars to 11 percent on Pakistani rupee certificates. The amount of profit offered on these certificates will be difficult to achieve based solely on investing in stocks, equities, and state-owned securities. The real estate sector has recently shown signs of improvement as an industry, and with measures being taken to boost the industry such as the establishment of the real estate regulatory authority and the recent Rs 100 billion package for the construction sector, investment in real estate can prove a highly profitable avenue for foreign remittance-based certificates. The Prime Minister’s objective of constructing five million homes in five years to provide affordable housing to the masses also needs financial backing from the government to support the banks in giving low mark-up subsidy loans. This is another area where investments can be made for boosting the real estate sector, and in turn, the economy as a whole. Lastly, looking at the vast amounts of technological advances being made in PropTech and Artificial Intelligence, the real estate market is bustling with innovation and products that serve the sustainable development of Pakistan and provide a basis for future economic growth.
Pakistan has a massive potential to boost its economy using the real estate sector. The influx of foreign remittances through the recently launched Roshan Digital Accounts and the subsequent investments in Naya Pakistan certificates and other avenues such as stocks, bonds, equities, and real estate has opened enormous opportunities for Pakistan. Using this resource, Pakistan can boost its real estate sector by investing in the construction and development of houses under the Naya Pakistan Housing Program. As real estate is linked to many allied industries, this will ultimately boost the economy of Pakistan.
The Naya Pakistan certificates offered under the Roshan Digital Accounts offer lucrative investment options with interest rates between 9.5 percent for US dollars based certificate to 11 percent for Pakistani rupee based certificate.
Considered as one of the most vital industrial segments of any country, real estate is the single most important factor for Pakistan’s future economic business cycle and long-term growth.
Real estate consists of five main categories namely, residential, commercial, industrial, raw land, and special use.
With an unstable currency, volatile stock market, and lower return rates on investments, real estate remains a safe investment option for many residing in the country and those living overseas.
The Government alone cannot incentivise and subsidise the entire sector. The recent inflow of foreign remittance proves investor confidence in Pakistan’s real estate market and holds the potential to uplift the real estate industry.
The new initiative, Roshan Digital Accounts, provides innovative banking solutions for millions of non-resident Pakistanis seeking investment opportunities in Pakistan.
The country’s net foreign exchange reserves have also increased by $8 billion since June 2019. This has greatly helped improve Pakistan’s economy and has helped solve the current account deficit problem.
Dawn. (2020). Roshan account receives $7.7m in a single day. Retrieved from Dawn: https://www.dawn.com/news/1595143
Investopedia. (2021). Real Estate. Retrieved from Investopedia: https://www.investopedia.com/terms/r/realestate.asp
Pakistan Embassy. (2020). ROSHAN DIGITAL ACCOUNT INITIATIVE FOR NON-RESIDENT PAKISTANIS (NRPS). Retrieved from Pakistan Embassy: https://pakistanembassy.se/roshan-digital-account/
Samaa. (2020). Roshan Digital Account: Ready for a changing world. Retrieved from Samaa.tv: https://www.samaa.tv/sponsored-content/2020/12/roshan-digital-account-ready-for-a-changing-world/
State Bank of Pakistan. (2020). A New Era of Banking in Pakistan. Retrieved from State Bank of Pakistan: https://www.sbp.org.pk/RDA/index.html
The News. (2020). Expats lauded for response to ‘Roshan Digital Account’. Retrieved from The News: https://www.thenews.com.pk/print/750888-expats-lauded-for-response-to-roshan-digital-account