The economic impact of agriculture vs real estate land use can vary depending on the specific context and location. In Pakistan, Agriculture is an important sector and it contributes around 21% of Pakistan’s GDP. It also provides employment opportunities to a significant portion of the population. The main crops grown in Pakistan include wheat, cotton, sugarcane, and rice. However, it also faces a number of challenges. 

Agriculture land use can have a positive economic impact by providing food and other products for domestic consumption and export, creating jobs, and supporting rural communities. On the other hand,  Real estate land use can also have a positive impact by creating jobs in construction and related industries, and by providing housing and other buildings for people to live and work in. 

Real Estate Business Eating Up Green Pastures Of Pakistan. Pakistan is an agricultural country. Most of the GDP depends on agri-production. But Pakistan’s agri-production is declining (Statista, 2021). This decline will cause food shortages in future. To fulfill domestic food needs and demand, Pakistan will import grains and other food items. Food shortage can be threatening to a developing country. 

According to this data, within a decade the agriculture sector has declined from 25.13% to 21.01%. This 4% agricultural loss will have more negative effects in the long run. There are many reasons for the decline in agri-production. Some researchers say Land is losing its fertility. But an intense level urbanization trend has motivated Real estate business in Pakistan for the last 3 decades. Real estate business is eating up the green pastures of Pakistan. People are selling their land or they are forced to sell their agri-land for the real estate projects. The profits and balance sheets of real estate business have been ignored by the Government for the tax and fee recoveries, as real estate business is no-risk business with abnormal returns. 

How is the real estate business linked with abnormal returns?

Real estate businesses can earn significant profits through a variety of methods, such as buying properties at a low cost and selling them at a higher price, collecting rent on properties they own, and earning commissions on the sale or rental of properties. They can also earn money through property management services and by providing financing for real estate transactions. Additionally, businesses may take advantage of market conditions and make strategic investments in real estate to generate profit.

Real Estate Regulatory Authority (RERA) Act 2020 introduced by the government. The Real Estate  Regulatory Authority (RERA) Act regulates and promotes the real estate industry in Pakistan. It makes real estate businesses responsible and enforces to protect the rights of consumers, transparency of business, accountability and efficiency in the real estate sector.

The main objectives of the RERA Act 2020 include:

1. Protecting the interests of homebuyers by ensuring that developers deliver projects on time and as per the specifications agreed upon.
2. Enhancing transparency in real estate transactions by requiring developers to disclose detailed information about their projects and by making it mandatory for them to register their projects with the RERA.
3. Ensuring that disputes between developers and homebuyers are resolved quickly and efficiently through the establishment of a dispute resolution mechanism.
4. Providing a platform for consumers to raise complaints and seek redressal in case of any violations of the act.
5. Improving the quality of construction and ensuring compliance with building codes and regulations.
6. Promoting fair play in real estate transactions and bringing in more accountability and transparency in the sector.

The act applies to all ongoing and new real estate projects, residential or commercial and applies to developers, promoters, and real estate agents. It also applies to the real estate intermediaries and makes it mandatory for them to register with the RERA. The act empowers the RERA to take action against non-compliant entities and also provides for penalties for non-compliance of the provisions of the act.

The questions are How efficiently RERA will work for prevailing concerns or is it another regulatory burden and hard to be implemented

Real Estate Business & Economic Growth

Real estate business can be a significant contributor to economic growth. The real estate industry creates jobs and provides income for many people, including developers, builders, architects, brokers, and real estate agents. Additionally, it also encourages international investments. It generates revenue for governments through property taxes and other related fees.

This graph shows the rise of construction related businesses. The prices will rise 3-times by 2029. That is showing abnormal business growth and investments in the real estate business without considering the economic, social and climate problems related to real estate business. 

Real estate development can also have a positive impact on the economy by driving urbanization and providing housing and commercial spaces. This can lead to increased productivity and economic activity, as more people can live and work closer to job opportunities, and businesses can access a larger customer base.

In addition, a healthy and stable real estate market can be an important indicator of overall economic health. Rising real estate prices can signal confidence in the economy and increased demand for housing, while falling prices can indicate a struggling economy.

However, Real estate business might also have negative side effects as well. Rapid urbanization and aggressive real estate development can put pressure on natural resources and lead to environmental degradation. Also, it can lead to price inflation, unaffordability and displacement of lower-income people from urban centres.

It is important to note that the impact of real estate business on the economy can be very context specific and depend on how the business is regulated and how the housing market is functioning. A well-functioning and sustainable real estate market can be a driver of economic growth and urban development, but it’s important to address any negative consequences as well.

Real Estate Business has Ignored Many Business Ethics

Real estate business is linked to tax avoidance. The Real Estate Market in Pakistan is not well-studied, despite attracting a lot of domestic investment. The paper focuses on analysing a specific part of this market, which is the Real Estate Brokerage Market. Real estate brokers, also known as Real Estate Agents (REAs), have a significant impact on the Real Estate Market. Due to persistent information asymmetries, REAs often have the ability to set prices, often to the disadvantage of property buyers and sellers. Additionally, the lengthy paperwork and transfer procedures associated with buying and selling property often leave buyers and sellers with no choice but to hire REAs, who charge high commissions. Furthermore, the Real Estate Brokerage Market is not regulated and there are almost no formal requirements for becoming a REA. However, the REAs surveyed in the paper do not object to having more licensing and regulatory frameworks.

The survey also found agreement among REAs that there should be mandatory training courses and certification for Real Estate Market that all REAs should take before operating in the market. There is a need for more research to study the role of REAs in the market, their ability to influence prices, and the impact on the Real Estate Market. It is suggested that a complete ban be enforced on practicing as a REA without registering with the relevant authority, and that educational institutions and the government should introduce short courses and certifications in Real Estate. Additionally, it is suggested that online listing of sales and transfers along with sale prices should be compulsory, and that online listings should be linked with land record data to prevent fake listings. The entire process and necessary documentation for the transfer of titles should be available on relevant department’s/office’s websites, along with the availability of soft copies. (PIDE, 2022)  

Real Estate Business is Catalyst to Climate Change

Wheat is the main crop of Pakistan for domestic needs. In 2022, the wheat production was affected by climate change. Instant rise in temperature did not allow wheat grains to grow and grain weight. Pakistan suffered 4-6% production loss in 2022 (Tribune Express, 2022). That loss will affect food supply in the early months of 2023. This is just a trailer of climate change. In the future great production is expected, as soil is losing its capacity to produce due to unfavorable environment.

The 2nd most demanded product in the world is Pakistani mangoes. 2022 was the worst year for Pakistan’s Mango production. Farmers faced losses due to climate change, floods and pre heatwave.

The real estate business can contribute to climate change in a number of ways. One way is through the energy consumption of buildings. Buildings account for a significant portion of energy consumption and greenhouse gas emissions, and the construction and operation of buildings can have a large environmental impact. For example, the use of fossil fuels for heating and cooling, lighting, and powering appliances can contribute to carbon emissions.

Another way the real estate business can contribute to climate change is through urban sprawl. Urban sprawl, or the spread of development into previously undeveloped areas, can lead to increased transportation emissions, as people have to travel further to get to work or other destinations. Urban sprawl can also lead to the destruction of natural habitats and wildlife.

Additionally, the construction of buildings and infrastructure often requires the destruction of natural habitats, which can lead to loss of biodiversity and the destruction of ecosystems that provide important services such as carbon sequestration, water regulation, and pollination.

Overall, the real estate business can have a significant impact on the environment, and it is important to consider the environmental impact of the construction, operation and maintenance of buildings, as well as their location and land-use patterns to minimize the negative effects and promote sustainable development.

Agriculture Growth & Improvement Ways    

There are several ways to increase agricultural growth in an agricultural country, including:

1. Investment in research and development to improve crop yields and animal productivity.
2. Provision of financial assistance and subsidies to farmers to purchase seeds, fertilizers, and other inputs at a lower cost.
3. Building infrastructure such as irrigation systems and storage facilities to reduce crop loss and increase efficiency.
4. Encouraging the use of modern technology, such as precision agriculture, to increase efficiency and reduce costs.
5. Providing education and training to farmers on new techniques and best practices to improve crop yields and animal productivity.
6. Promoting the development of agricultural processing and value-added industries to increase the profitability of farming.
7. Encourage alternative land use and agroforestry instead of complete dependence on a single crop farming.

Normal Growth of Real Estate Business

For normal growth of real estate business, government could do following things:

1. Restriction on converting agricultural land into non-agricultural land for real estate development.
2. Creating policies and regulations that discourage the conversion of agricultural land into real estate developments by raising taxes and fees.
3. Encourage sustainable and alternative means of urban development.
4. Encourage corporate farming on a large scale, to reduce pressure on small farmers to sell their land for real estate.

It is important to note that agriculture and real estate industries have complex interplay and might have trade offs and any such policy needs to be considered with the holistic perspective and balancing the other industries and social implications.

Agriculture challenges for Pakistan 

Pakistan has faced a number of agricultural challenges in recent years, including:

1. Lack of investment in research and development, leading to low crop yields.
2. Limited access to credit, inputs and modern technology for farmers.
3. Insufficient infrastructure for irrigation, storage and transportation of agricultural products.
4. Climate change, pests and disease, leading to crop failure and reduced yields.
5. Soil erosion and degradation due to overuse and lack of proper land management.
6. Lack of support and protection for small farmers from the government.
7. Increased urbanization and conversion of agricultural land to other uses, such as real estate development.

These issues have contributed to a decline in agricultural growth in Pakistan, however the degree and statistics of this decline could be variable and multi-faceted, which would be better discussed with a country-specific agriculture and economy expert.

Conclusion

The real estate business in Pakistan is having a negative impact on the agricultural sector by consuming valuable green pastures and agricultural land. The conversion of agricultural land for real estate development can have a detrimental effect on food security and the livelihoods of rural communities. The real estate industry can also contribute to climate change through increased energy consumption and urban sprawl, leading to higher transportation costs and increased pollution.

To address these challenges, it is important for the government to implement policies and regulations that support sustainable development, such as protecting agricultural land from conversion to real estate development and investing in modern technology and equipment for the agricultural sector. It is also important for the real estate industry to incorporate sustainable practices, such as energy-efficient buildings and smart urban planning.

Additionally, it is important to have a balance between the economic benefits of agriculture and real estate land use, considering the long-term economic and environmental impacts of land use decisions. The government should also invest in education and training opportunities for farmers and real estate professionals, providing them with the necessary skills and knowledge to operate in a sustainable manner. With these measures in place, Pakistan can continue to develop its economy while preserving its natural resources and protecting its agricultural sector.

References

PIDE. (2022). An Analysis of the Real Estate Brokerage Market in Pakistan. Pakistan Institute of Development Economics. Retrieved Jan, 2023, from https://www.pide.org.pk/wp-content/uploads/wp-0216-an-analysis-of-the-real-estate-brokerage-market-in-pakistan.pdf

Statista. (2021). Pakistan: Distribution of gross domestic product (GDP) across economic sectors from 2011 to 2021. Retrieved Jan, 2023, from https://www.statista.com/statistics/383256/pakistan-gdp-distribution-across-economic-sectors/#:~:text=In%202021%2C%20agriculture%20contributed%20around,came%20from%20the%20services%20sector.