Understanding Pakistan's 'Plots and Files' Business Model
On February 22, 2025, Finance Minister Muhammad Aurangzeb made headlines at the 3rd All Pakistan Chambers Presidents Conference in Faisalabad. He criticized the ‘plots and files’ business, a speculative practice in Pakistan’s real estate sector, calling it unsustainable. While the government supports the construction industry, Aurangzeb emphasized the need to differentiate between real estate speculation and genuine construction.
However, Nasir Gondal, CEO of Gondal Group of Marketing, has a different perspective. He argues that the ‘plots and files’ business, if regulated and taxed properly, could generate significant revenue for the government. This blog explores both sides of the debate, providing actionable insights into the real estate sector’s challenges and opportunities.
What is the ‘Plots and Files’ Business?
The ‘plots and files’ business is a unique real estate practice prevalent in Pakistan. Here’s how it works:
Plot Files: Buyers purchase documents (files) representing future plots in developing housing societies.
Balloting Process: Once the land is developed, plots are allocated through a balloting process.
Speculative Trading: Investors trade these files at higher prices before the plots are physically available, aiming for quick profits.
Why It’s Controversial:
Lack of Transparency: Many housing societies operate without proper approvals or NOCs, leaving investors vulnerable.
Speculative Nature: The practice often prioritizes quick profits over genuine development, leading to market instability.
Finance Minister’s Stance: Why the Government Opposes It
Aurangzeb’s critique centers on three key issues:
1. Unsustainable Speculation
No Real Development: The practice prioritizes quick profits over actual construction.
Market Instability: Artificial price hikes make housing unaffordable for genuine buyers.
2. Differentiating Real Estate vs. Construction
Support for Construction: The government backs projects that create jobs and housing.
Rejection of Speculation: Aurangzeb vows to curb practices that don’t contribute to physical infrastructure.
3. Structural Reforms
- Policy Focus: The government plans reforms to promote transparency and long-term grow
Nasir Gondal’s Counterargument: A Case for Regulation, Not Ban
Nasir Gondal, a seasoned real estate expert, believes that the ‘plots and files’ system can bring in a lot of money if managed well.
1. Revenue Potential
Tax on File Issuance: Gondal proposes a PKR 50,000 tax per file. With 1 crore files issued in 3-4 years (50% in Islamabad/Rawalpindi), this could generate:
PKR 50,000 x 1 crore = PKR 50,000 crore (≈ $1.8 billion).Tax on File Transfers: A 5% tax on file resales could add PKR 25,000 crore annually (assuming 50% of files are resold).
2. Developer Contributions
Land Acquisition Taxes: Developers already pay taxes when purchasing land for projects.
NOC Enforcement: Gondal stresses cracking down on illegal societies to protect investors.
3. Protecting Investments
Transparency: Mandate NOCs and public disclosure of project details.
Escrow Accounts: Ensure developers use funds only for approved projects.
The Crisis of Illegal Housing Societies in Pakistan
Aurangzeb and Gondal agree on one issue: illegal housing societies are draining public trust and revenue.
1. The Scale of the Problem
No NOCs: 60–70% of housing societies in Punjab operate without approvals (Source: LDA 2024 Report).
Investor Losses: Buyers in illegal projects lose PKR 500+ crore annually (Source: FBR).
2. Government Inaction
Weak Enforcement: Authorities rarely penalize fraudulent developers.
Political Influence: Many illegal societies have backers in power.
A Path Forward: Solutions for Sustainable Real Estate
To salvage the sector, experts recommend:
1. Tax Reforms
| Tax Type | Rate | Projected Revenue |
|---|---|---|
| File Issuance Tax | PKR 50,000 | PKR 50,000 crore |
| File Transfer Tax | 5% of value | PKR 25,000 crore |
| Developer Land Tax | 10% of value | PKR 10,000 crore |
2. Regulatory Overhaul
NOC Mandate: Ban file sales for societies without approvals.
Public Database: Launch a portal to verify project legality.
3. Investor Protection
Compensation Fund: Use tax revenue to reimburse fraud victims.
Fast-Track Courts: Resolve property disputes within 6 months.
Case Study: How India’s RERA Transformed Real Estate
Pakistan can learn from India’s Real Estate Regulatory Authority (RERA), which:
Curbed Fraud: Mandated project registration and escrow accounts.
Boosted Revenue: Increased tax collection by 40% in 5 years.
A Balanced Approach for Growth
While Aurangzeb’s crackdown aims to eliminate speculation, Nasir Gondal’s tax model offers a pragmatic middle ground. By regulating, not banning, the ‘plots and files’ business, Pakistan can:
Generate PKR 85,000+ crore annually from real estate.
Protect investors from fraud.
Fuel construction and job creation.
The choice is clear: Reform, don’t reject.