Ihsan Ullah
Regulations are a set of administrative rules and laws by an authoritative mechanism. State or any other regulatory authority impose regulations they have the primary objective of enforcing and monitoring social control, either intentional or unintentional. Regulation can be beneficial Like it may assurance of tax revenue, make sure accountability, break down monopolies of business, Insur of minimum qualifications, provide a sophisticated economic framework and protection etc. on the other side, regulations(overregulation) have cons, such that may consume time, the burden of administrating work, the differences in the subjectivity of politicians and a small business may hurt, etc.
Regulations are everywhere in every sector of the economy, but in Pakistan, if we say that all sectors are heavily overregulated, it will not be wrong. Over regulation is the burden of excessively with rules and regulation.In Pakistan overregulation exist in the form of excess of required ducuments, NOCs etc. For example, to take permission for making of high rise building in Pakistan need 8 NOCs, the transfer of land take more than 2 years etc.
The Real estate Broker Industry though is one such area that is significantly deficient inadequate regulation. Let’s take an example that you want to pursue a career in the field of medicine or law. In that case, you need formal 16 to 18 years of education and proper licenses from relevant regulatory boards. On the other hand, in the case of starting a career as a Real Estate Agent, you do not need any formal education or any other certifications while no other forms of permission or qualifications are required to work as a Real Estate Agent.
In the European countries especially, in Germany, it is not easy like in Pakistan to become a real estate agent. The authority has set a specific criteria and set of regulation if someone want to join real estate market. First, the firest requirement is a high school diploma and 20 hours of training in the real estate market. Second, you must have an official trade permit according to German law of 34C, and for applying for permit basic documents are required like Identity card, tax certificate and police clearance, and the person should not be an insolvency. In Germany, Real estate also pays Value added tax to tax office. Regarding the broker fee or commission, in Pakistan the commission is about 2%. While in Germany, there is no minimum or maximum requirement, both seller and buyer are free to negotiate on broker fee or commission.
The Main advantages of to set regulation on real estate market would that Government have a record of all the registered broker and can take decision to issue or not more licenses and Broker market will work on the market principle of demand and supply. The seller and buyer will contact with real estate agent with any hesitation as we can observe many scams on the name of file in real estate market especially in selling or buying of new plot. It will reduce the scams to certain level.
Government role in regulation:
Government can take steps to regularize the real estate market. By regulation, we do not propose overregulation. Government must set minimum education criteria for entering the real estate market. Now everyone is a real estate agent, and Government should issue licensees and also set criteria for a license like a driving license on annual bases and charge fees and government must Charge Income tax, Sales tax or value-added tax from Real estate agents. There is no single institute or training school that offers training or short courses for real estate agents government should take responsibility for training or provide training with the collaboration of private institutes. There should be a check and balance on the sale and purchase of the plots, and sell/ purchase should be limited to residential, not for commercial purposes. When purchasing plots, there should be a certain period that the owner should make a house on the plot, in case of failure authority impose a considerable fine.
If the Government takes these steps as a reward, the Government will generate revenue. The investment out circulation in the real estate market can be turned into circulation, and the economy can get a tremendous amount of investment in other sectors, and at last, public will start to trust a registered agents to avoid scams.
The author Ihsan Ullah is a young economist associated with Pakistan Institute of Development Economics (PIDE), Islamabad.
