What is ‘File’ in Pakistan’s real estate market?

Real estate as an investment in Pakistan

Real estate remains one of the most profitable asset classes in Pakistan. A 2020 report by PT Profit estimated its worth between US$300 Billion to US$ 400 Billion mark. A good investment in this sector means you enjoy predictable cash flow, excellent returns, tax advantages, and a secure path towards building wealth.

That being said, due to lack of data, and convoluted market practices a vast majority of Pakistanis do not possess the rudimentary knowledge, capital, or risk capacity to stake large investments in real estate, and those who choose to invest are prone to manipulation by agents, affiliates and middlemen. With the limited resources at hand, a lot of people opt for what they deem as a more flexible and efficient mode of real estate ownership, the 'file'.

In this article, we plan to uncover what is file in Pakistan's real estate market. Can it be trusted? And what are the risks that come with it? In light of that, we will also share how PropTech innovations are making investments safer, transparent, and more affordable in Pakistan.

What is a "file"?

In Pakistan, plot file, more commonly known as file, is an indigenous term used for a written pledge of undeveloped and non-demarcated land. Real estate developers frequently issue these documents in their pursuit to attract investors and generate developmental income for their projects.

In simpler terms, a file is a document that promises you'll get a piece of land when it is developed. It describes the planned location, size, and plot number of your future plot. Files, however, are not a final note and are prone to change in plans by development or approving authorities. A file by no means guarantees possession.

Risks with plot files

Although plot files give customers the leverage of low investment capital and flexible payment plans, many people fall prey to dishonest developers, deceptive agents and fraudulent schemes. Becoming a bogus developer does not require any legal binding as there are zero barriers to entry.

While plot files provide proof of a predetermined estate, these documents hold little to no legitimacy before gaining a physical footprint. Legally, jurisdictional permits and approved location mapping are required to back up that claim. It is common among fraudulent real estate developers to issue files for their projects that remain unapproved, overstated, and without any actual proof of existence. Most people are not fully educated about these processes and easily get cheated with fallacious information.

In several stances, fake developers spend huge sums on marketing to attract customers and sell plot files on account of their brand reputation. Once the plot files are sold, they use that money to purchase land for housing society and then further manipulate investors with plot registrations fee, installment markups, and possession charges that might not legally apply. And since it is a low ticket item, it often gets sold aggressively without any authentication or regulation.

In other cases, big investors acquire hundreds of files of a certain project and then pump and dump them at their discretion, manipulating the market at their whim, making profits for themselves at the expense of other smaller investors. Sadly, Pakistan's file system is riddled with malpractices and sham schemes.

How can PropTech play a role in mitigating these risks?

In the past few years, the emergence of PropTech companies has helped Pakistan's real estate industry overcome such persisting challenges and adapt to safer, transparent, and more reliable modes of real estate ownership.

WIth robust access to data, people can see the actual state of the projects they are investing in. By adopting web3.0 and distributed ledger technology, all transactions can be recorded transparently which makes it impossible to oversell. PropTech platforms enable developers to share real-time project and construction updates with investors, increasing trust.

Given its promising potential in Pakistan, investors have begun foraying into such digital solutions that help streamline the journey towards property ownership. DAO PropTech, is a digital platform that connects real estate developers and investors while ensuring transparency, affordability, and inclusivity in the real estate sector.

With DAO PropTech's BLOC, you can instantly view numerous projects, expand details, and invest in any desired sizes and quantities. The digital ledger system enables the validation of existing customers and seamless transfers of land records. To learn more, head on over to daoproptech.com and sign up to the platform.

Mirza Irfan Baig

Senior Content Creator