Qudsia Bano

Financial experts have welcomed the Securities and Exchange Commission of Pakistan’s (SECP) decision to revive the dormant regulatory framework governing advance deposits for real estate projects, describing it as a timely step to restore market discipline and investor confidence in a sector long marred by unregulated practices.

According to the SECP, the framework—formulated under the Companies Act, 2017—requires real estate companies to obtain a No-Objection Certificate (NOC) before advertising or collecting public advances and to maintain all deposits in a dedicated escrow account. The measure, previously held in abeyance, aims to enhance transparency in project financing and protect buyers’ investments.

Dr Sajjad Hasan, senior economist at the Applied Economics Research Centre, University of Karachi, said the move reflects a growing recognition that Pakistan’s real estate sector needs oversight comparable to other financial markets. “For years, property developers have operated with limited financial accountability. Introducing escrow-linked advances can help curb speculative activity and ensure that collected funds are actually used for project completion,” he observed.

He added that such a mechanism would also help address chronic problems of delayed housing schemes and consumer mistrust. “An escrow-backed deposit structure can protect buyers from fraudulent or stalled projects, which have become common in metropolitan areas like Karachi and Lahore,” Dr Hasan said.

Dr Ibrar Bhatti, Director at IGI Investment Bank Ltd, said the SECP’s initiative could usher in long-needed professionalization within a sector that contributes more than two percent to Pakistan’s GDP and employs millions. “Developers with genuine business models will benefit as the framework discourages fly-by-night operators. The real challenge will be implementing it without creating unnecessary red tape for legitimate firms,” he commented.

He noted that nearly 60 percent of private real estate projects in major cities rely on advance payments from customers before completion—often without any clear segregation of funds. “The absence of regulatory safeguards has historically enabled misuse of these deposits. If properly enforced, the SECP’s trustee and escrow mechanisms can ensure investors’ money is used where it should be,” Dr Bhatti said.

He stressed that Pakistan’s real estate market, valued at over $300 billion, remains largely undocumented and vulnerable to speculative bubbles. The lack of uniform regulation has resulted in inconsistent pricing, weak project governance, and limited consumer protection. Dr Bhatti added that adopting regulatory models similar to escrow and project audit systems used in Malaysia and the UAE could attract more institutional investors and overseas Pakistanis to the sector.

Credit: INP-WealthPk