Buying and Selling Property in Pakistan
The principal law governing buying and selling of immovable property, or land, in Pakistan is the Transfer of Property Act, 1882 (the “Act”). However, some rights in immovable property may be acquired, under other laws, through easements and licenses. Land may be acquired, though only for public purposes or, for enterprises, in public interest, through compulsory acquisition under various Land Acquisition laws.
The transactions about immovable property may assume two modes depending upon the application or non-application of the Act to a certain area of Pakistan. Further, the Act has a dual character as it is both a federal and a provincial law. This implies that in different provinces or in the Federal Capital Area, regulations relating to the transfer of land may be different.
Provincial Application of the TPA
The Act has been extended to the Province of Sindh. Sections 54, 107 and 123 of the Act have been extended to all municipalities (urban areas) in the Punjab but not to other areas of the Province. Section 54, paras, 2 and 3, and sections 59, 107 and 123 have been extended to every Cantonment in the Provinces. The Act has been brought into force in Gawadar and to non-agricultural lands in the Province of Balochistan. The Act is in force in the Khyber Pakhtunkhwa Province. It has also been made applicable to the area of the Federal Capital.
There are certain formalities in relation to transactions regarding land prescribed by various Registration Acts of each Province. Some transfers of immovable property are ineffective without complying with the formalities prescribed by registration laws. The Registration Act also applies to the Federal Capital Territory. Government however has the power to exclude any area from the operation of the Act or Registration Act.
What if the TPA is not applicable?
Where the Act does not apply, the title documents (called record of rights) evidencing various kinds of rights in the immovable property are prepared and maintained under two provincial laws —Land Revenue Acts or where established, Land Records Authority Acts. This position is obtained usually in rural areas. The mode of transfer of rights in immovable property in rural areas is usually mutation, however in addition to that various transfer deeds under the Act may simultaneously be used. Mutation should be followed by registration under Registration Act where the said property law is applicable.
Various transactions in immovable property are described in Chapter III (Sale), Chapter IV (Mortgage and Charge), Chapter V (Lease), Chapter VI (Exchange) and Chapter VII (Gifts) of the Act.
Sale of Land
Right of sale arises from the absolute and unqualified ownership of all interests in the immovable property and sale disposes of all rights and interests unconditionally in the sold property to the buyer without any remainder to the seller. Sale of immovable property usually starts with an Agreement to Sell under which a certain portion of agreed upon price is advanced (earnest money) to the eller by the prospective buyer. The buyer agrees to pay the rest of the sale amount within an agreed upon time failing which it is stipulated in the Agreement to Sell that buyer’s advance is liable to be forfeited and the Agreement to Sell terminates, leaving the seller free to enter into a new Agreement with any other buyer.
The buyer is subject to the rule of caveat emptor and therefore before entering into any Agreement to Sell, in his or her own interest, needs to verify the title of the seller. In this regard it needs to be checked whether the seller has valid and complete title documents and whether property is clear from all kinds of charges (title search) since according to the law, the seller cannot legally transfer a property to the buyer unless he has valid title in it. The prospective buyer however may be a bona fide purchaser if he has made a reasonable effort to ascertain the title of the buyer but due to some unforeseen cause or eventuality or fraud on the part of the seller could not succeed.
Sale Deed is a title document in the transaction of sale which is a detailed, solemn and technical document and parties usually have it prepared, executed and registered under professional legal advice. If any material misrepresentation is made by any party in the Sale Deed, the aggrieved party is entitled depending upon the circumstances of the transaction to restitution and damages. If after the Agreement to Sell, the seller fails to execute the Sale Deed, the law entitles the buyer to enforce the Agreement to Sell through court and recover damages against the buyer provided that the buyer is ready to pay the outstanding sale consideration.
Investment in Real Estate
Real estate is a lucrative and thriving sector in Pakistan and has vast opportunities for growth and development both in private and public zones. With the rapid rise in population, demand for housing and business spaces are on the rise. The government is also spending considerably to provide residential facilities and infrastructure to the citizens. Real estate therefore is on boom notwithstanding the decline in other sectors.
Investment in real estate is, inter alia, subject to the provisions of Foreign Private Investment (Promotion and Protection) Act 1976 (the Act 1976). Section 3 of the Act 1976 allows the Government to allow foreign private investment (including a Pakistani citizen having dual nationality) in the national interest. Further there is Foreign Investment (Promotion and Investment) Act 2022 (the Act 2022) which provides several incentives to investors. Section 3 of the Act 2022 prescribes that the Federal Government may allow foreign investment in any sector. The difference between the provisions of both laws is that the Act 2022 allows liberal rather unrestricted latitude to the Federal Government to determine sectors for investment; the Act 1976 allows a very restricted discretion.
In every district of a Province, Development Authorities along with Local Governments that are established by law, have rules and regulations to control the development of real estate in their respective jurisdictions. In the Federal Capital this function is exercised by the Capital Development Authority (CDA). The Real Estate Regulatory Authority was established in 2020 to regulate the real estate sector for the Federal Capital Area.
The main governmental entities dealing with investment policies are the Federal and Provincial Boards of Investment. However, at the time of actual investments and commencement of business many other departments come into picture.
Act for facilitating Investments and businesses in Pakistan
In order to facilitate investment and business, the Parliament has passed Pakistan Single Window Act 2021. In addition, many special economic and technology zones providing incentives for investment have been established by law. China Pakistan Economic Corridor Authority Act 2021 opens up new avenues for business and investment. There are also Public-Private Partnership laws where private individuals or entities are encouraged to pool their resources with the government for completion of a project.
The Securities and Exchange Commission of Pakistan (SECP) through Real Estate Investment Trust Regulations 2015 has introduced a new regime for real estate investment by providing opportunities not only to generate income but also to trade securities publicly and raise finance for business development. REIT further facilitates small investors to invest in real estate ventures which are managed and supervised by professionals and experts in the business.
About ABS & Co.
We are a well-known, highly trusted, and respected law firm in Pakistan, with a specialized property law practice.
We provide legal advice in respect of all transactions regarding sale and purchase of immovable properties including drafting of Agreement to Sell, Sale Deeds, Lease Deeds, Gift Deeds, License Agreements and other related documents, title search, liaison with government authorities, registration of property with the sub-registrar, mutation etc.
For the purposes of investment in real estate, we provide services including negotiations and liaison with sellers of land, government agencies and other concerned persons, drafting of legal documents, title search, providing reliable and sound advice and information about laws, government investment policies and procedures, investment opportunities and avenues in Pakistan. Our real estate lawyers are accomplished lawyers in their field.
Our property lawyers provide end-end advice on structuring a transaction for the sale and purchase of land. Some of the biggest property developers in the country seek our advice and counsel on their property and land related matters.